Raising your first capital is hard enough without navigating the fine print of deal instruments. SAFE notes. Convertible notes. They sound interchangeable.
They’re not.
For UK cybersecurity start-ups, where burn is real, traction is lumpy, and buyers move slower than you’d like, the wrong instrument can box you in before you ever close a Series A.
Here’s how to think about SAFE vs. convertible notes, especially through the lens of a technical, security-focused start-up building from the UK.
Here are the Basics
A SAFE (Simple Agreement for Future Equity) is not a loan. There’s no interest. No maturity date. It converts to equity when you raise a priced round.
A convertible note is a loan. It accrues interest. It has a maturity date. If you haven’t raised a priced round by that date, things get complicated fast.
Both delay valuation. Both are easier than raising a full equity round. But only one keeps the clock off your back.
Where SAFEs Work Well
SAFEs are cleaner, faster, and favoured by early-stage investors familiar with US-style funding. They’re ideal when:
- You’re pre-product or pre-revenue
- The round is founder-led or full of angels
- You want to avoid negotiation over valuation
- You plan to raise a priced round within 12–18 months
Cybersecurity founders benefit here if you’re early in R&D and still testing GTM motion. Less paperwork. Less legal drag.
Where Convertible Notes Make More Sense
Notes offer more protection for investors. Which means:
- They’re more palatable to traditional UK investors
- They may be required if you’re raising from funds with strict mandates
- They’re seen as safer if your next round timing is unclear
- They might include discounts and interest, which matters in slower cycles
For UK security start-ups still working out procurement hurdles or selling to government-adjacent buyers, a note might feel more aligned with local investor expectations.
Watch Out for SEIS/EIS Compatibility
This matters. If your investor wants SEIS/EIS tax relief (and many UK angels do) make sure your SAFE or note is SEIS/EIS compliant. Not every US template is.
If not structured right, the investor loses relief, and you lose the cheque. Work with a lawyer who’s done this in the UK, not just someone who Googled “YC SAFE.”
Think Beyond the Paper
The best SAFE or note still depends on:
Who’s backing you?
What kind of follow-on they can offer?
How much time and leverage you’re buying before pricing equity?
Ask your investor: what happens if we don’t raise in 18 months? If they wince, the note might come with strings. If they say, “No stress—we’ll bridge,” the SAFE might be fine.
Bottom Line
Pick the instrument that fits your timeline, your backers, and your next 12–18 months of uncertainty.
For most UK security start-ups, SAFEs win on simplicity—if you’re confident in raising a proper round soon.
Convertible notes win on structure—if you need more investor protection or time to figure things out.
Neither is wrong. But one is often wrong for you. Choose the clock you’re willing to race. Then build something worth converting into.
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