As SAFEs become more prevalent in pre-seed financings, here are some points to keep in mind, that may bear on just how much you take advantage of the famed (and compelling) flexibility SAFEs afford.

Call these "lessons learned" after having gone through a score of conversion rounds.

  1. Consider deleting the participation right. Or at least take the position that, "this is something investors should have to negotiate for," rather than making it a given in every SAFE you issue. Put more directly, consider how the participation rights could impact the attractiveness of your company to investors willing to lead a priced round.
  2. If you DO grant the participation right, consider limiting it to just the next round!
  3. Think hard about mixing and matching too many different forms of SAFEs. If feasible, pick one or two variations and stick with those. Though we're big fans of high resolution fundraising, there's a tipping point where too much variation causes problems at the priced round. Think of those conversions where you have seen multiple designations of a class, each with its own original issue price.
  4. Consider putting MFN terms, when appropriate, in a side letter. The MFN provision in a standard SAFE compromises the control a company has in determining when the MFN should kick in.

Bottom line: be deliberate about the SAFE you use, and don't be afraid to customize it. A template SAFE is no more sacrosanct than a template convertible note.

Image Credits: Collage by Amanda Hartzell, using images by Javier Cabezas, Steven Heycock, OliM, Juan Pablo Bravo, Dima Lagunoz, and iconoci, all under a Creative Commons license (CC BY 3.0 US).