Carolynn Levy - Modern Startup Funding

TL;DR

Modern early-stage startup funding has shifted from expensive, slow Series A preferred stock rounds to convertible securities like the SAFE (Simple Agreement for Future Equity) for first fundraising. The SAFE eliminates debt features of convertible promissory notes while retaining speed and flexibility, but priced rounds still occur later as the primary mechanism for larger investments.

Key insights

• Old-style Series A preferred stock rounds took months, cost $25k–$100k in legal fees, and required negotiating multiple documents (voting rights, liquidation rights, pro rata rights), making them unsu
• Convertible promissory notes (bridge loans) were originally stopgap measures between priced rounds but were repurposed as standalone first-fundraising documents; however, they remain debt with interes
• The SAFE was created because debt is inappropriate for equity investments: angel investors are not lenders and startups should not worry about accruing interest or repayment deadlines.