Yes, they typically bind all shareholders—including founders, employees, and option holders - unless carve-outs are negotiated.

Investors use drag-along rights to ensure that all shareholders participate in a sale, avoiding minority holdouts that could block or delay an exit.

Yes. Founders can push for broad-based weighted average terms, carve-outs for employee equity, or even conditional waivers to maintain alignment with investors.

Because it resets the conversion price to the lowest new share price, which can drastically dilute founders and employees even if only a small down round occurs.

The broad-based weighted average formula is the market standard, striking a balance between investor protection and founder dilution.

Issuing new equity at a lower price than earlier rounds (a “down round”) typically triggers the adjustment.

In big exits (10x+ invested capital), liquidation preferences usually have little impact since all parties receive strong returns, but they can still influence exact distributions.

Yes. Founders can negotiate for 1x preferences, caps on participation, or paripassu treatment across rounds to maintain balance.

In this scenario, all proceeds go to preferred shareholders up to their preference amount, and founders may receive nothing.

Most deals use a 1x non-participating liquidation preference, meaning investors get their original investment back first, but no more.

SAFEs are best for early-stage, fast-moving fundraising where simplicity and speed are critical, while convertible notes may be more appropriate if investors prefer debt protections.

Yes. Issuing SAFEs at different caps can lead to more dilution than founders expect when they all convert. Careful modeling is important.

Not always. Some SAFEs are uncapped, though most include either a cap, a discount, or both to reward early investors.

A SAFE is not debt, meaning it has no interest rate or maturity date. A convertible note starts as debt and must either convert or be repaid.

They are most useful at the pre-seed and seed stage, or as bridge financing between rounds, when valuations are difficult to set and speed of funding is important.