SAFE Notes are just Convertible Debt Notes without any of the Debt and Interest accruing.

Convertible Debt, if not converted to Equity at some point, sits as debt (accruing interest!) that will be due at a future maturity date. The problem with that concept is that most startups never have the capital pay that debt back, so the debt notes are essentially useless.

Therefore startups have move to SAFE Notes which are the same concept (we punt the valuation, set a Valuation Cap and Discount Rate) just without any debt component.

If the startup fails to raise additional capital, the SAFE Note can convert to Equity, but it cannot collect a “Cash Debt” in anyway.

Wherever possible it’s a better deal for Startups to use a SAFE Note vs. Convertible Debt.