I get asked about the difference between a SAFE (similar agreement for future equity) and a convertible note at least three or four times a week. Here’s the punchline: while a SAFE note sounds like a warm hug for a founder, for an investor, it’s about as “safe” as a screen door on a submarine. Let me pull back the curtain on why this ironically named instrument isn’t always an investor’s best friend.

Here’s the deal: a convertible note is a debt instrument, while a SAFE is… well, not. When you sign a SAFE, you’re not on the cap table yet, and you aren’t holding any debt against the company either. It’s an investment limbo. SAFEs were born inside YCombinator in Silicon Valley during a tech boom when the community was so tiny and intimate that everyone basically shared the same toothbrush. Back then, a SAFE was like a high-tech handshake on a napkin—totally fine when you’re dealing with your best friends, but perhaps a bit too “trust-based” for the cold, hard realities of today’s market.

When you’re navigating the high-stakes world of startup failures, a convertible note is your sturdy safety net, while a SAFE note is more like hoping for a soft landing on a bed of cacti. With a note, you get that sweet seniority over other debt holders and a clearly defined face value—principal plus interest—that actually exists on paper. A SAFE? That’s just financial limbo, leaving you with neither the perks of debt nor the rights of equity. It’s like waiting for a bus that might not even have a route yet!

I often hear founders chirping about how SAFEs are “so easy” because they just use the standard YC template and dodge those pesky attorney fees. Newsflash: just because you’re using the same cookie-cutter template over and over doesn’t mean the terms aren’t still there, lurking under the surface. Thinking a template simplifies the reality of your deal is like thinking a pre-printed menu makes the calories disappear. Whether or not you involve a lawyer, those terms are repetitive, rigid, and still need a microscope.

Furthermore, I am well aware that a significant number of investors fail to grasp the actual distinctions between these instruments. Just because the rest of the market seems to be adopting them doesn’t make it the right move. To be perfectly clear: it is not.

Founders often ask why I insist on convertible notes over SAFEs. To put it bluntly: it’s my personal version of “house rules.” You’re always free to chase that SAFE note dream elsewhere, but around here, we like our investments with a side of structure. In the Midwest—and Michigan especially—convertible notes are the local language. It’s not just a preference; it’s our standard operating procedure, served with a smile but zero wiggle room.

So, while the name suggests a safety blanket, a SAFE note is actually more of a financial tightrope walk without a net—at least from where we’re sitting. We’ve made the executive call to skip the acrobatics and stick to what works. Investing in SAFE notes is a hard “no” for us, and it’s not up for debate. No exceptions, no loopholes, and no mind-changing; we simply don’t do them. After years in the trenches, I’ve found that the clarity of a convertible note beats the “safe” gamble every single time. It’s not just a preference; it’s common sense.

So, do you want our capital, or not?