In essence, the valuation cap ensures that the INITIAL SAFE investor gets a better price per share than a later investor. If the entity can find more money than the valuation ceiling in a later cycle of equity financing, the investor will benefit because it receives equity on the basis of the lower valuation ceiling and thus receives more shares. If the money is lower than the valuation ceiling, the investor continues to benefit from the fact that he can choose the lowest amount as the basis for calculating equity financing. Unlike a convertible bond, a Simple Agreement for Future Equity (SAFE) does not involve interest, expires and does not set a minimum amount of funds to be financed in equity. Apart from Y Combinator, SAFE is tested and used by startups in the crowdfunding markets. In 2020, the number of non-convertible notes (for example. B SAFE and kiss notes) used by pre-financing companies is just as widespread (58%) The number of convertible bonds issued. If companies become more well known to SAFE from the beginning, this rather young security may have found its ideal niche in the offers of Title III, also known as crowdinvesting for all investors. In the Zegal application, you have four ways to convert SAFE into preferred shares as part of equity financing: a SAFE looks like a convertible loan, both allowing the investor to obtain shares at a preferential price. However, the two instruments are fundamentally different, because the convertible bond is a debt, but not a SAFE. You should consider the following differences in the choice of creating a convertible note or a SAFE: The valuation cap is a pre-negotiated amount that is used to “cap” the conversion price. Without a valuation cap, the conversion price at which a SAFE is converted into preferred shares is the price of preferred shares for equity financing (with or without a discount, depending on the choice you make in the Zegal application). In the case of an valuation cap, the processing price is determined by the valuation ceiling, regardless of the cost of equity financing.