Convertible Note (or SAFE) vs Equity: What’s the Better Deal? (1 of 3 in a video series from our Partner Cara Stone, LLP)

Sept. 25, 2020 – We are happy to share this wealth of information from our Digital Startup Ecosystem Map Sponsor, Cara Stone, LLP, on a decision many founders are confronted with, when should my company use a convertible note or safe? In this 3 part series Managing Partner, Mark Graffagnini, first explains what you need to consider in choosing Convertible Note (or SAFE) vs Equity: What’s the Better Deal?

Many companies believe that raising money through a convertible note or SAFE early will help defray a low valuation. This is often not the case. Knowing how a convertible note will impact your company’s future is key. Making sure to run the numbers is highly important and Cara Stone has even created a downloadable tool to help you do just that; a Convertible Note or SAFE vs. Equity Calculator!

The number one reason to use a note or SAFE is in a scenario where the company is trying to incentivize investors to come into the round early.  The second reason to use a convertible note or SAFE is if you need to get the company funded between two equity rounds. Mark goes more in depth on those reasons in the 2nd part of the series How To Use A Convertible Note or SAFE.

The last video in the series covers Jumpstarting Your Round with a Convertible Note or Safe. The two fundamental reasons to use a convertible note or SAFE are to jumpstart a round with key early investors (who will likely bring in larger investors later), or as a bridge loan between equity round. Many great examples are explained further to better understand using them for jumpstarting your round!

Mark Graffagnini, from Cara Stone, will be our guest at our Virtual Venture Cafe’s 2nd Thursday Main Event on Thursday, Oct. 8th so mark your calendars! He will be discussing Convertible Notes (SAFES) further and be open for any questions you might have. We hope you can join us!