SAFE Note Trends Update
Investors and founders are rethinking how they use SAFE notes, and the changes aren’t subtle. Deal terms that were once afterthoughts now carry real weight, negotiations are more detailed, and the market as a whole is leaning toward tighter, more investor-friendly structures. If you’re raising capital with SAFEs this year, you’re operating in a different environment than the one startups enjoyed just a few years ago.
Valuation caps aren’t just “nice to have” anymore
A few years back, uncapped SAFEs floated around pretty casually. Founders liked them because they pushed the valuation question to a later day; investors tolerated them because competition for deals was intense.
That dynamic has cooled. Investors now want clearer ceilings on conversion pricing, and many accelerators are nudging founders toward setting realistic caps. Even pre-revenue companies are expected to anchor their cap to something concrete, whether that’s traction, IP assets, or even signed LOIs.
A fair cap helps prevent unpleasant surprises later. It also signals to investors that you understand how your business fits into the broader market rather than clinging to guesswork.
“Most favored nation” clauses are quietly becoming standard
MFN provisions used to pop up mostly in friends-and-family rounds. Today, you’ll see them in seed rounds, bridge rounds, and everything in between. Investors want reassurance that if you later issue a better SAFE, they won’t lose out.
It sounds simple, but here’s the thing: MFN terms can create administrative chaos if you end up issuing several SAFEs with different conversion mechanics. The more variation you introduce, the more careful you need to be when you finally convert everything into preferred stock.
If your company is growing fast, an MFN clause can be reasonable. Just make sure you understand how many other terms it pulls in alongside it.
Post-money SAFEs are the norm, and they’re changing expectations
The shift from pre-money to post-money SAFEs gave investors what they always wanted: a predictable percentage ownership after conversion. It also means founders need to track dilution more carefully.
With post-money structures, each new SAFE directly dilutes the founder and existing holders. There’s no hiding the ball. Some founders find this stressful; others find it refreshing because it forces cleaner cap-table planning from day one.
If you’re juggling multiple SAFEs, consider using a cap-table tool like Carta or Pulley. Trying to track conversion math on a spreadsheet can get messy fast.
Discounts are getting steeper
With startup valuations correcting, investors are negotiating more aggressive discount rates—20 percent used to be typical; now 25 to 35 percent isn’t unusual. It’s not a sign that your business is weak. It’s simply the current climate.
A stronger discount may also help close a round quickly. And speed, especially during periods of market uncertainty, is worth quite a bit.
Side letters are on the rise
Founders sometimes worry that side letters make a round feel “too formal,” but the opposite is true. Investors increasingly expect clean side letters covering things like:
• limited information rights
• pro rata participation
• quick confidentiality assurances
One word of caution: each extra letter adds friction when you’re converting SAFEs later. Keeping these documents uniform helps future-you avoid headaches.
Where this leaves founders
Raising capital with SAFEs still makes sense for many early-stage companies. They’re fast, flexible, and much lighter on legal fees than priced rounds. But the market is maturing, and the way investors use SAFEs is maturing with it.
If you’re preparing a SAFE round this year, think through:
• whether your valuation cap is grounded in reality
• how your discount compares to current norms
• whether adding an MFN clause will complicate future rounds
• how each SAFE affects your eventual dilution
Fundraising always involves a mix of optimism and risk, and a well-structured SAFE helps keep that balance under control.
If you want help reviewing or drafting your SAFE documents, our team at The Long Law Firm PLLC is here for you. You can book a free consultation anytime at long.law/intake.