[jon_richards]

How does a safe prevent you from debating valuation? It seems like a safe note with no discount is rarely a good deal unless you hit the valuation cap (why not just wait until A otherwise?), and if you do hit the cap it's essentially equivalent to investing in a round priced at the cap (a little worse due to preference caps).

In what way is the cap not a "valuation"?

[dankohn1]

The argument for a seed investor to invest in a SAFE note with no discount and no cap is that the Series A round will be priced by a VC or superangel, and the seed investor will not otherwise have the opportunity to invest at that later point. That is, the seed investor is trading the opportunity to participate in an investment at all for control over the exact terms. But since neither the entrepreneur nor the seed investor have any idea what a pre-revenue company is worth, they're often fine delaying the valuation question.

[ravibala1]

So we raised on a convertible note with a cap and a discount. We're from the east coast and our accessible angel pool balked at SAFEs. An argument for a different thread :-).

I'd defer to Paul's point that choosing a too high (or non-existent) cap makes no sense. We did have to negotiate our cap and we set it so that we had a realistic shot of hitting 2-3x that in Series A pre money which in my mind is why an angel should be investing. I'd personally consider it a disappointing outcome if I raised at my cap and I'd hope my investors would as well.

A cap is not a valuation and I agree that everyone thinking it is, is a problem.

[rgbrgb]

>> why not just wait until A otherwise

1) For a VC: more performance info / better access to the A.

2) For an angel: most angels won't have access to the A, so seed rounds are their chance to invest early in a potentially VC track company.