Should venture investors be willing to invest via uncapped SAFEs (with no valuation cap)?
4 recorded positions from 4 people, first said Oct 5, 2022. They do not agree — the readings below are what each one actually argued.
No rules against instruments like uncapped safes get into the best companies by any mechanism
Rob Go · Jun 23, 2023
In a power law business, getting into the best companies matters more than deal terms — worth doing things like an uncapped note that you'd otherwise never do.
Attentive, one of their biggest hits, was an uncapped note they never would have done before, and it made him realize you just want to be in the best companies.
Scope: not a licence to do uncapped notes left and right
49:40 20VC: How to Raise a Venture Fund from Deck to First Meetings to Final Close, Why Venture is a Young Person's Game and Why Multi-Stage Funds Have Not Ruined Seed with Rob Go, Co-Founder @ Nextview
David Tisch · Feb 5, 2024
Investors should not have rules against instruments like uncapped SAFEs; the job is to get into the best companies by whatever mechanism, and for a truly best company today's price is the lowest point in its trajectory
Stupid rules block you from the best companies, and if it is the best company the current entry price will prove to be the cheapest you'll ever see
Scope: price logic holds only if it is genuinely the best company
82:45 20VC: The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best Founders Don't Need You, Why Uncapped SAFEs Are Good, Why Reserves Are Bad, Why Signalling is BS, Why Price Doesn't Matter with David Tisch & Terrence Rohan
Also on the record
Geoff Lewis · Oct 5, 2022
With a company that prices every round to perfection, an uncapped note can counterintuitively be the cheaper way to get exposure than competing to lead the next priced round
They were outbid by ~$100M on the Series A and believed the business would clearly work, so competing on price in the next round would have cost more than deploying on an uncapped note
23:44 Uncapped note can be cheaper than competing to lead a perfectly priced round
Terrence Rohan · Feb 5, 2024
Uncapped SAFEs are acceptable to invest in, provided there are provisions converting the note at some point if the company doesn't raise
82:35 Uncapped safes acceptable if conversion provisions exist
Your assistant can query this graph directly — 4 positions here, 19,646 across the corpus. Add 996.fm over MCP.