Startup & Venture · Early-stage financing
SAFE and Convertible Note Lawyer for Founders and Investors
Raising your first checks, or writing one? We draft or review SAFEs and convertible notes, run SAFE rounds of up to 10 investors, and handle the SEC Form D notice that is due within 15 days of the first sale. For African startups we also answer the question most guides skip: is your company actually ready to issue a U.S.-style SAFE?
SAFE or convertible note?
Both let an investor put money in now and receive shares later, usually at the next priced round, without setting a valuation today. The legal difference is that a SAFE is not debt and a convertible note is.
| Feature | SAFE | Convertible note |
|---|---|---|
| Legal character | Contract right to future equity; not debt | Debt |
| Interest | None | Accrues, and usually converts with principal |
| Maturity date | None | Yes; repayment or conversion questions arise if no round happens |
| Repayment obligation | None in the ordinary course | Principal is owed until it converts |
| Typical conversion terms | Valuation cap, discount, or MFN | Valuation cap and discount |
| Paperwork | Shorter, widely used standard forms | Longer; terms negotiated more often |
Some investors, including some development-finance and corporate investors, prefer notes because debt ranks ahead of equity. Founders usually prefer SAFEs because there is no maturity date. We explain the effect of each on your next round before you choose.
Our three SAFE and note services
Choosing SAFE terms: cap, discount, MFN and pro rata
- Valuation cap. Sets the highest valuation at which the SAFE converts. On a post-money SAFE, the cap fixes the investor's ownership before the next round, so founders can see dilution in advance.
- Discount. The investor converts at a discount to the next round's price. Some SAFEs have a discount and no cap; some have both.
- MFN (most-favored nation). An uncapped SAFE that lets the investor adopt better terms the company later gives to another SAFE holder.
- Pro rata side letter. A separate letter giving the investor the right to buy into the next round to keep its percentage. It is an extra commitment for the company, so grant it deliberately.
The commonly used U.S. forms are published as cap-only, discount-only and uncapped-MFN versions, with a separate pro rata side letter and a user guide. We conform the form to your deal rather than rewriting it, which keeps it familiar to later investors.
Is your company ready for a U.S. SAFE?
The standard U.S. SAFE forms are written for Delaware and other U.S. companies. The publisher also offers cap-only versions for Canadian, Cayman and Singapore companies and tells companies elsewhere to consult local counsel. A Nigerian, Moroccan, Kenyan or other African company cannot simply sign the U.S. form: conversion into shares, shareholder approvals and any exchange-control steps are governed by local law.
- Already a Delaware company? You can use the standard forms.
- Local company only? Either flip first, or use a local-law instrument drafted with your home-country counsel. See Delaware flip for African startups.
- No company yet? Form a Delaware C-corp before taking U.S. money.
SEC Form D and other filings
Most SAFE and note rounds rely on a Regulation D exemption from SEC registration. Form D is a notice, not an approval, but it has a firm deadline.
| Filing | Fee | Notes |
|---|---|---|
| SEC Form D (Regulation D offerings) | No SEC filing fee | Due within 15 days after the first sale; filed online on EDGAR (SEC) |
| State notice filings | Varies by state | May be required where investors live; we check |
We confirm which exemption the round relies on, collect the investor information it requires, and prepare and file Form D. We do not give investment advice and do not act as a broker or placement agent.
Company side, step by step
- Choose the instrument and terms: SAFE or note, cap, discount, MFN, pro rata.
- Confirm the company can issue it: entity type, authorized shares, board approval, and any flip question.
- Draft or conform the SAFE or note, and any side letters.
- Collect investor information and accreditation responses.
- Sign electronically and receive funds.
- File Form D within 15 days of the first sale and check state notice filings.
- Update the cap table with a conversion model for the next round.
For investors: what we check before you sign
- Entity status: is the issuer a Delaware company, or a foreign company signing a U.S. form it cannot perform?
- Conversion math: cap, discount and how existing SAFEs and the option pool affect your percentage.
- MFN and pro rata rights, and whether other investors received better terms.
- Who signed, and whether the board approved the issuance.
- For an African company: whether a flip is planned, and what happens to your SAFE if it is.
For a deeper review of the company itself, see legal due diligence.
Common problems
- Stacked SAFEs with different caps that no one has modelled, causing heavy dilution at the seed round.
- Side letters promised by email and never signed.
- Form D filed late, or not at all.
- A local company signing a U.S. SAFE that local law will not let it honour.
Founder visas
Forming or restructuring a U.S. company does not give anyone a visa or permission to work in the United States. Founders who want to live and work here need their own immigration strategy, and the company structure you choose now can help or hurt it later.
- E-2 treaty investor. The State Department's treaty country list shows E-2 treaties with Morocco, Senegal, Egypt, Tunisia and Cameroon, and E-1 and E-2 treaties with Togo and Liberia. Founders who are nationals of those countries can look at the E-2 treaty investor visa.
- O-1 extraordinary ability. Nigeria, Ghana and Kenya do not appear on that treaty list. Founders from those countries more often look at the O-1 visa, which turns on the founder's own record rather than nationality.
If a founder's petition is delayed or denied, see the federal-court options for E-2 denials and O-1 denials.
Who handles your matter
DC Federal Litigation PLLC performs the U.S. corporate and venture work on this page itself, from our office at 1717 N Street NW, Washington, DC, for founders and investors wherever they are. Meetings and signing happen remotely, so you do not need to travel.
We advise on U.S. law: Delaware corporate law, the U.S. transaction documents and the federal securities filings that go with them. We do not advise on the law of your home country, and we do not give tax advice. Where those questions arise, we work alongside your home-country counsel and your tax adviser, and we say in writing at the start which questions belong to them.
Before any work begins you receive an engagement letter that sets out the scope of the work, what is included and what is not.
Frequently asked questions
Should we use a SAFE or a convertible note?
A SAFE is not debt: there is no interest, no maturity date and no repayment obligation in the ordinary course. A convertible note is debt with principal, interest and a maturity date. Founders usually prefer SAFEs for simplicity; some investors prefer notes for their creditor position. The right choice depends on your investors and how soon you expect a priced round.
Which SAFE should we use: cap, discount or MFN?
A valuation cap is the most common, because it fixes the investor's maximum conversion price. A discount-only SAFE suits a round expected soon at a known price. An uncapped MFN SAFE suits a small early check where neither side wants to set a value. We model each against your likely seed round so you can see the dilution.
Can a company outside the United States use the standard U.S. SAFE?
Not as written. The widely used SAFE forms are written for U.S. companies, with cap-only versions for Canadian, Cayman and Singapore companies; companies elsewhere are told to consult local counsel. An African company should either flip into a Delaware parent first or use an instrument drafted under its own law.
Do we have to file anything with the SEC?
If the round relies on Regulation D, the company files Form D online within 15 days after the first sale. The SEC charges no filing fee. Some states also expect a notice filing where investors live. We prepare and file Form D as part of our SAFE round and note services.
What is a pro rata side letter?
A separate agreement giving a SAFE investor the right to buy shares in the next priced round so it can maintain its ownership percentage. It is common for larger checks. Because it limits how much of the next round you can offer to new investors, grant it deliberately rather than to everyone by default.
How does a SAFE convert at the next round?
When the company sells preferred stock in a priced round, each SAFE converts into shares at the lower of the price implied by its valuation cap or the discounted round price, depending on its terms. On a post-money SAFE, the cap fixes the holder's percentage before the new money. We give you a conversion model with every round.
What does your SAFE round package include?
One agreed set of terms for up to 10 investors, conformed SAFEs, any side letters, the board consent, investor information and accreditation questionnaires, electronic signature management, the Form D filing and an updated cap table. More than 10 investors, or individually negotiated terms, are scoped separately.
As an investor, what should I check before signing a SAFE with an African startup?
Confirm which entity is issuing it and whether that entity can legally issue it. Check the cap, discount, MFN and pro rata terms against other SAFEs outstanding, confirm board approval, and ask whether a flip is planned and how your SAFE carries over. Our investor review covers each point in writing.
Is a convertible note ever a better choice?
Sometimes. Investors who must hold debt, or who want repayment rights if no round happens, may require a note. A note can also suit bridge financing between rounds. The interest rate, maturity date and what happens at maturity are the terms to negotiate carefully.
Get your SAFE or note right before the money moves
Send us your proposed terms or the document you were asked to sign. We confirm the instrument, the filings and the scope. Start with a paid consultation. If you engage the firm within 30 days, your consultation fee is credited in full toward your initial retainer.