It's crucial for founders to understand their dilution when raising money through SAFEs or convertible notes, as they may end up owning significantly less of the company than expected after a priced round.

When you offer a convertible note, you're selling a promise of equity rather than actual equity in your company.

Convertible notes are great for quick fundraising, but equity is often preferable for larger amounts due to better management and oversight.

Understanding the mechanics of dilution and cap tables is essential for founders to navigate the fundraising process effectively. I hope this will not be anything new to you as we discuss raising money on post-money SAFEs and what happens as you hire people and issue equity to employees.

Valuation, which is the value of your enterprise, and dilution, which refers to how much of your company you have sold, are critical concepts in fundraising.

Convertible notes are fast and simple, typically requiring only 3 to 5 pages of documentation, unlike equity deals which can involve hundreds of pages.

Dilution occurs when you sell a percentage of your company, reducing your ownership stake; for example, selling 20% of your company means you own 20% less afterwards.

Convertible notes are a type of debt that we no longer recommend using for fundraising.

Most companies will raise money first on SAFEs or other convertible instruments, which can complicate understanding how much of the company has been sold.