Startups typically receive their first formal round of funding from friends, family and angel investors. Depending on the startup’s funding needs, the investment can range from a few hundred thousand dollars to a few million. This funding is critical for scaling business operations and building a customer base.

Seed rounds or friends and family rounds often are completed using SAFEs or convertible notes. The benefit of these instruments is that both the founders and the early stage investors can “kick the can” down the road in terms of setting a valuation for the startup. Unlike a preferred stock financing (sometimes called a “priced round”), SAFEs and convertible notes do not require the parties to put a specific valuation on the startup — even if there is a “valuation cap.” READ MORE