How AI is Shaping the Future of Venture Capital
RSVP for April 30th
1

Asked by

Community Member

on

in

Fundraising

Lowering SAFE cap for larger tickets?

What is your advice/reaction to a founder that wants to issue two levels of SAFE notes?

Level 1: Minimum Investment: $10,000
 Conversion Terms: Convertible to stock in the Series A round at a $20 million pre-money valuation cap.
 
Level 2: Minimum Investment: $50,000
 Conversion Terms: Convertible to stock in the Series A round at a $10 million pre-money valuation cap.
1 See in Base
1

Answered by

Mike Suprovici

on

This is not a good approach and will cause 409a valuation issues for the founder. It's also incredibly difficult for them to explain this to future investors. Every investor in this round should come in on the same terms. Then, after they close, they can raise the cap for the next SAFE as they can justify this with more traction.

Join the Leaders of Venture 2.0

Our graduates are creating disruptive capital with exceptional expertise, ethical investing practices, and exceptional returns. Whether you're launching your first fund or scaling an established firm, VC Lab provides the tools, network, and support needed to succeed in today's venture landscape.

Apply Now
How do I start raising my first venture fund? What are the key considerations for becoming a Limited Partner?
How can I improve my emerging manager firm's deal flow? What strategies help attract institutional LPs?
How do I build a compelling investment thesis? What are best practices for portfolio management?
How can I differentiate my VC firm in a crowded market? What are the typical fund terms for emerging managers?