Taking money from investors comes with accountability; if a startup fails to deliver, it can lead to lasting damage to the founder's reputation.

If a company becomes self-sustaining and does not raise a priced round, the SAFE does not address this situation, which can leave investors uncertain about their investment's future.

When a startup is losing money, it's essentially a wealth transfer from investors to consumers, and only a few companies will successfully navigate this situation by being very smart about their finances.

Founders need to be aware that their ownership percentage can decrease significantly due to dilution from SAFEs and new equity rounds, so they should plan accordingly for future fundraising. The percentage of ownership for SAFE investors is based on the valuation cap in the SAFE, and if the priced round valuation is higher than the cap, they convert at the cap, receiving more shares for the same investment than Series A investors.

When signing a SAFE, you might expect to own around 9% of the company based on an $800,000 investment at an $8 million cap, but this can be diluted by new money coming in during the priced round.

In a merger or acquisition, a SAFE investor converts their investment into shares of common stock based on the target valuation, allowing them to participate in the proceeds of the merger.

The SAFE, or Simple Agreement for Future Equity, is designed for very early-stage startups that haven't raised a priced round yet.

Convertible securities like SAFEs allow startups to raise funds without the burden of debt, making it easier for founders to focus on building their companies rather than managing loans and interest.

Most startups fail, and only a small percentage achieve significant financial success, so view equity as a tool to enhance your chances of success rather than a fixed resource to be divided.