In "The Case for the Uncapped SAFE," I explored how SAFEs (Simple Agreements for Future Equity) have evolved and their current usage in startup fundraising. Based on recent 2024 data, I pointed out that while many startups still prefer using a cap, many use both — despite contradictory advice from the SAFE creator (Y Combinator).
Caps work well for startups with predictable growth, while discounts make sense for ventures with higher uncertainty and front-loaded risk. Combining the two can actually penalize startups instead of helping them.
I also suggested an alternative approach: uncapped SAFEs with larger, compounded discounts. This method could better compensate investors for the risks they’re taking, especially for high-risk, high-reward startups. Without a cap, startups could have more flexibility, and investors would still see appropriate returns. This approach could bring renewed value to SAFEs, particularly for hard tech founders.
Read more: https://news.crunchbase.com/startups/uncapped-safe-case-gray-equidam/