Module 6 · Priced rounds and notes
SAFE, note, or priced round
Compare the three ways to raise early money for cost, speed, control, and dilution, and learn which one fits your raise.
In this lesson you will learn
- How SAFEs, convertible notes, and priced rounds differ in cost, speed, control, and dilution
- Why the same valuation number sells a different part of the company in each instrument
- Which instrument fits a first raise, a bridge, and a round with a lead investor
Three investors each offer Northwind $1M “at $10M”. The first sends a SAFE. The second sends a convertible note. The third sends a term sheet for a priced round. The three offers use the same two numbers, but they are three different deals. This lesson compares them, so that you can select the instrument that fits your raise.
The three instruments side by side
Y Combinator compares the three instruments on one page. This table gives its comparison in our words:
| SAFE | Convertible note | Priced round | |
|---|---|---|---|
| What it is | A right to future shares | A loan that converts into shares | Preferred stock, sold now |
| Interest | None | Yes, frequently 2% to 8% | None |
| Maturity date | None | Yes. It can force repayment or default | No |
| Price per share now | No. The cap or the discount sets it at conversion | No. The conversion sets it | Yes |
| Legal cost | Lowest | Moderate | Highest |
| Speed | Fastest | Moderately fast | Slowest |
| The investor’s percentage | Accurate when you sign a post-money SAFE | An estimate until conversion | Accurate |
| If the company closes | After all debt, equal with preferred stock | Debt, so paid first | Preferred stock, before common stock |
| Investor rights | Only in a side letter | Different for each deal | Many: a board seat, votes, information |
| Usual use | The default for first raises | Bridges and special cases | Series A and subsequent rounds |
Source: Y Combinator, “SAFE vs. Convertible Note vs. Priced Round”, page as of November 2026.
The table shows four differences that are important for a founder: cost, speed, control, and dilution. The next sections show them one at a time.
Cost and speed
A SAFE is one short standard document. A priced round must have a charter, a purchase agreement, and three or more other agreements. The anatomy of a priced round lesson gives Westaway’s October 2026 numbers:
- SAFE: up to approximately $10K in legal fees, and 1 to 2 weeks.
- Priced seed on Series Seed documents: $25K to $65K in total, with the investor’s lawyers, and 4 to 8 weeks.
- Series A on NVCA documents: $65K to $150K or more in total, and 6 to 10 weeks.
Westaway writes that your legal cost “depends mostly on the type of round”. Thus the same fees hurt a small raise most. On a $500K priced seed round, $25K to $65K is 5% to 13% of the money. On a $5M round, the same fees are 0.5% to 1.3%. The sources give no dollar range for notes. Y Combinator puts their legal cost between the SAFE and the priced round.
Control
The three instruments give investors very different control:
- SAFE. A standard SAFE gives no board seat and no votes. Some SAFE investors get a pro rata side letter, but that is a separate document.
- Convertible note. Before it converts, the holder is a creditor. The holder gets no board seat, but the maturity date gives the holder power. On that date, the holders can tell the company to pay cash.
- Priced round. The investors get preferred stock with votes and protective provisions. The lead frequently gets a board seat. The control terms lesson shows each of these rights.
Dilution: the same number, three results
Predict first
An investor puts $1M into Northwind at a $10M post-money SAFE cap and owns $1M ÷ $10M = 10%. In a priced round at a $10M pre-money valuation, what does the same $1M buy?
Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.
It buys $1M ÷ ($10M + $1M) = 9.09%. In the priced round, $10M is the value before the money. The post-money valuation is $11M, so the same $1M buys a smaller part.
The valuation number means a different value in each instrument. A post-money SAFE cap includes the SAFE money. A note’s cap and a priced round’s valuation usually do not include the new money. These are the three formulas, at the cap and before the next round’s money:
Post-money SAFE
Share = Investment ÷ Cap
Note with a pre-money cap
Share = Balance ÷ (Cap + Balance)
Priced round
Share = Investment
÷ (Pre-money + Investment)
For $1M at $10M, with 18 months of 7% interest on the note:
| Instrument | Calculation | The investor owns |
|---|---|---|
| Post-money SAFE | $1M ÷ $10M | 10.00% |
| Note | $1.105M ÷ ($10M + $1.105M) | 9.95% |
| Priced round | $1M ÷ ($10M + $1M) | 9.09% |
At the cap, a note operates like a priced round at its pre-money cap. Only the interest makes it different, and each month adds a little more.
Move the raise and the valuation number in the comparison. At a small raise, the legal fees of the priced round use a large part of the money. At a large raise compared with the valuation, the post-money SAFE sells a much larger part than the priced round.
Compare
One raise, three instruments
Use the same money and the same valuation number for a SAFE, a note, and a priced round. Compare what each one sells and costs.
Post-money SAFE
10%
The investor's share, before later rounds dilute it
- The number means
- The value after the money
- Legal fees
- Up to $10K
- Fees as a share of the raise
- Up to 1%
- Time to close
- 1 to 2 weeks
- Interest and maturity
- None
- Investor rights
- No board seat and no votes
Convertible note
9.95%
The investor's share, before later rounds dilute it
- The number means
- The value before the money
- Legal fees
- Moderate
- Fees as a share of the raise
- No survey number
- Time to close
- Moderately fast
- Interest and maturity
- 7% a year, and a maturity date
- Investor rights
- A lender until the note converts
Priced round, Series Seed
9.09%
The investor's share, before later rounds dilute it
- The number means
- The value before the money
- Legal fees
- $25K to $65K
- Fees as a share of the raise
- 2.5% to 6.5%
- Time to close
- 4 to 8 weeks
- Interest and maturity
- None
- Investor rights
- Preferred stock and votes
For $1M at $10M, the SAFE sells 10%, the note 9.95%, and the priced round 9.09%. The post-money SAFE treats $10M as the value after the money, so it sells more than the priced round. The note's 18 months of interest add 0.86 points to what a priced round sells.
On Series Seed documents, the legal fees for the priced round are $25K to $65K, which is 2.5% to 6.5% of the money. Legal cost depends mostly on the type of round, so the fees use the largest part of the money on a small raise.
In 2025, most early rounds under $4M on Carta used SAFEs or notes, not priced rounds.
Work it out
Northwind raises $2M. A priced round at a $16M pre-money valuation sells what percentage of the company?
The post-money valuation is $16M + $2M = $18M. The round sells $2M ÷ $18M = 11.11%. A post-money SAFE at a $16M cap sells $2M ÷ $16M = 12.5%.
How sure is the percentage?
The three instruments also differ in what you know on the day that you sign:
- Post-money SAFE. You know each SAFE’s percentage at its cap: investment ÷ cap. But the total depends on each SAFE that you sign after it. Y Combinator gives an example: five $100K SAFEs at a $5M cap sell 10%, not 2%.
- Convertible note. The percentage is an estimate until the note converts. It increases each month with the interest, and it depends on the share count in the note.
- Priced round. The percentage is accurate on the day of the closing. The cap table after the round shows each holder.
SAFEs and notes also do not sell their shares on the day that you sign. Their dilution comes all at one time, at the next priced round, when they convert in the pre-money. In the full Series A example, that one step decreases the founders from 87.5% to 70%.
When a priced seed round fits
A priced seed round sells Series Seed preferred stock on short documents, not SAFEs. It costs more than a SAFE. In exchange, the company gets an accurate cap table, an accurate price, and investors with the rights of preferred stock.
A priced seed fits when a seed lead wants preferred stock and sets the price. Westaway writes that “many seed funds are happy with Series Seed” for rounds of $2M to $5M. The round also converts the SAFEs that came before it, so the founders see the full cost of the SAFEs.
A priced round also sets terms that stay with the company. Y Combinator writes that Series A terms set a precedent for later rounds. It also writes that bad terms are difficult, and frequently impossible, to remove. Thus the terms of your first priced round are important for each round after it.
Which one fits
The instrument follows from the investors and the size of the raise. These four cases cover most early raises:
- Your first raise from angels or an accelerator. Use a post-money SAFE. It is fast and costs little, and you know the percentage that you sell. In Q2 2026, SAFEs were 93% of US pre-seed rounds on Carta.
- A bridge between two priced rounds, or an investor who wants debt. A note fits. Y Combinator gives bridge loans for later-stage companies as one use for notes. In Canada, notes were 48.2% of the convertible deals in Osler’s 2025 data.
- A lead investor sets the price and wants a board seat. Use a priced round. Westaway writes: “Choose by lead investor, not by round size.” Many seed funds accept the shorter Series Seed documents.
- A large early round. Carta data shows where companies change to priced rounds. In 2025, most early rounds under $4M on Carta used SAFEs or notes. In 2024, that was true only for rounds under $3M.
Quiz · question 1 of 5
Test what you learned
Three offers give $1M "at $10M". The first is a post-money SAFE. The second is a note with a $10M pre-money cap and no interest yet. The third is a priced round at a $10M pre-money valuation. Which one sells the largest part of the company?
Key takeaways
- 1.A SAFE is the fastest and least costly instrument. It has no interest and no maturity date, and it gives no board seat.
- 2.A convertible note is debt. Its interest adds shares, and its maturity date gives the holders power. It fits an investor who wants debt, or a bridge.
- 3.A priced round sets an accurate price and sells preferred stock with rights, frequently with a board seat. It costs the most and is the slowest.
- 4.A post-money SAFE cap operates like a post-money valuation. A note’s pre-money cap operates like a pre-money valuation.
- 5.Legal cost depends mostly on the type of round. Thus a priced round uses a large part of the money in a small raise.
Sources
- 1.SAFE vs. Convertible Note vs. Priced Round. Y Combinator, Accessed 2026-11-04.
- 2.Who Pays the Legal Fees in a Startup Funding Round, and How Much Should It Cost?. Westaway, 2026-10-13.
- 3.Series Seed vs. NVCA Documents. Westaway, 2026-10-14.
- 4.In the pre-seed market, valuation caps on new SAFEs keep getting bigger. Carta, 2026-08-25.
- 5.State of Pre-Seed: Q2 2025. Carta, 2025-08-21.
- 6.State of Pre-Seed: 2025 in Review. Carta, 2026-02-19.
- 7.A Standard and Clean Series A Term Sheet. Y Combinator (Jason Kwon), 2019-01-28.
- 8.2025 Deal Points Report: Convertible securities intelligence. Osler, Hoskin & Harcourt LLP, 2026-05-27.