Top Pre-Seed VC Funds: A Founder’s Directory

The Simple Agreement for Future Equity (SAFE) was introduced by Y Combinator in 2013 and updated to the post-money structure in 2018. By 2026, the post-money SAFE with a valuation cap and no discount has become the overwhelming market default – but the terms still matter enormously to your eventual dilution.

Post-Money vs. Pre-Money SAFE: Know the Difference

Sources: Y Combinator SAFE Documents; Carta State of Pre-Seed Q2 2026.

Key SAFE Terms Explained

• Valuation Cap. The maximum company valuation at which your SAFE converts to equity. If the next priced round values the company above the cap, SAFE investors convert at the cap, giving them more shares. Present in the large majority of pre-seed SAFEs – always negotiate the cap, since it’s the most important term.
• Discount Rate. A percentage reduction from the Series A share price, rewarding SAFE investors for early risk. Only about 25% of SAFEs issued in 2026 include a discount – down from roughly 40% in 2021 – as cap-only terms have become the clear market norm. The investor gets whichever mechanism (cap or discount) results in the lower conversion price.
• MFN Clause (Most Favored Nation). Lets investors benefit from better terms in future SAFEs. Common in very early “angel” SAFEs before the main round is priced. Use MFN as an alternative to a cap when you genuinely don’t yet know the right cap.
• Pro Rata Rights. The right for investors to maintain their ownership percentage in future rounds by writing additional checks, typically granted via a side letter rather than the SAFE itself. See our pro rata guide for how to negotiate this deal-by-deal.

SAFE Conversion Terms, 2026 Snapshot

Source: Carta State of Pre-Seed Q2 2026. When a SAFE or note does carry a discount, it’s usually 20% or less – deeper discounts have become rare.

10 SAFE Tips for Pre-Seed Founders

1. Always use the YC post-money SAFE template. Download directly from ycombinator.com/documents. Don’t reinvent the wheel — investors are familiar with the standard template and will push back on non-standard terms.
2. Avoid pre-money SAFEs in 2026. Pre-money SAFEs are legacy instruments that create ownership uncertainty when you stack multiple of them, since each new SAFE changes the others’ ownership percentages. If an investor insists, educate them or walk away.
3. Model your cap table before signing each SAFE. Calculate your total SAFE dilution before each new instrument. A common mistake: raising across multiple SAFEs at aggressive caps and discovering you’ve given away far more than expected before a single priced round.
4. Set a valuation cap that’s realistic, not aspirational. An aggressive cap may deter experienced investors who will model the math. For rounds under $1M, expect a median cap around $8-10M in the current market; for $1-2.4M rounds, $15M is typical.
5. Cap-only beats cap + discount, usually. Roughly three-quarters of SAFEs are now cap-only. Offering both a cap and a discount gives investors double protection and can make your economics worse than a priced round. If an investor pushes for both, consider offering a higher cap in exchange for dropping the discount.
6. Standardize terms across your SAFE round. Issuing multiple SAFEs with identical terms simplifies your cap table and avoids conflicts at conversion. Progressive caps can work, but track dilution carefully as you move through them.
7. Disclose your SAFE obligations to future investors. Series A investors will see your full cap table. Undisclosed or poorly documented SAFEs are a diligence red flag. Use Carta or Pulley to track every instrument.
8. Understand your MFN clause implications. If you’ve issued any MFN SAFEs, new SAFEs at better terms will automatically upgrade MFN holders. Plan your SAFE pricing sequence carefully.
9. Build in 18-24 months of runway. Don’t raise the minimum. Series A revenue bars have risen, so your pre-seed should fund enough runway to reach clear milestones, plus a buffer.
10. Set up your books immediately after closing. The moment you receive wire transfers from SAFEs, you’re a funded company with investor expectations. Set up a Delaware C-Corp, open a startup-friendly bank account, onboard payroll, and get a startup accountant, like Kruze.

Convertible Notes: Still Relevant in a Few Industries

Convertible notes have fallen to their lowest share of pre-seed instruments in years, but they haven’t disappeared everywhere. They remain meaningfully more common – though still a minority – in biotech/pharma, medical devices, and energy, where longer development timelines and larger capital needs make debt-like downside protection more appealing to investors.

Outside of those industries (SaaS, fintech, adtech, consumer, gaming, crypto/Web3), notes are now rarely used at all. Over 80% of the convertible notes that are issued carry a pre-money cap, and the vast majority combine both a valuation cap and a discount – the opposite pattern from SAFEs.

For the full market picture – valuation benchmarks, deal structures by round size, and geographic trends – see our companion post: Pre-Seed Funding Guide: 2026–2027 Edition.

Kruze Consulting Can Help

Kruze Consulting is the accounting and finance partner for 800+ venture-backed startups. From bookkeeping and tax filings to CFO-level financial reporting and R&D tax credits, we handle the finance function so you can focus on building. Contact us for a free consultation.