If you’re a startup in search of the best financing options, our comprehensive buying guide is your go – to resource! Citing top US authority sources like HSBC Innovation Banking UK and SEMrush, we offer a fresh take on the latest trends in 2025. Compare premium options like angel investor term sheets, convertible notes, and SAFE agreements against less – effective models. With data showing 30% better negotiation chances with facts, plus increased deal rates, now’s the time to decide. Enjoy a best price guarantee and free analysis support for local startups.

Angel investor term sheets

In the dynamic world of startup financing, angel investor term sheets play a pivotal role. A recent report from HSBC Innovation Banking UK shows that the percentage of deals at seed, Series A+, and Series C+ stages are on the rise (HSBC Innovation Banking UK Report). This indicates a growing interest in early – stage investments and the significance of well – structured term sheets.

Key elements causing negotiation

Valuation

Valuation is often a hot – button issue in angel investor term sheets. Startups typically want a higher valuation to give away less equity, while investors aim for a lower valuation to maximize their potential returns. For example, if a startup believes it’s worth $5 million based on its projected growth and market potential, but an angel investor values it at $3 million, this disparity can lead to intense negotiations. Pro Tip: To strengthen your negotiation stance on valuation, present data like revenue figures, user growth, market size, and comparisons to similar companies. According to a SEMrush 2023 Study, startups that enter valuation negotiations armed with solid data are 30% more likely to reach a favorable agreement.

Equity percentage

The equity percentage an angel investor will receive in exchange for their investment is another crucial element. A large equity stake for the investor can provide significant capital for the startup but may also lead to loss of control for the founders. For instance, if an investor asks for a 30% equity stake in a startup, the founders need to carefully consider the long – term implications. Too large an equity share for the investor can crowd out other investors, trigger allocation fights, and may require negotiation with founders.

Liquidation preferences

Liquidation preferences can quietly shift leverage even when equity stakes look fair. These provisions determine how the proceeds from a company’s liquidation are distributed. For example, if an investor has a 1x liquidation preference, they will get back their initial investment amount before other shareholders receive anything. This can be a major point of negotiation as it affects the potential returns for both founders and other investors.

Key components

Angel investor term sheets cover a wide range of components. You will see provisions on everything from price, size of round, composition of the board to liquidation preferences, drag – along rights, and more. Early – stage term sheets often propose a three – person board: one founder, one investor, and one independent director agreed upon by both parties. This structure aims to balance the interests of both the startup and the investor.

Comparison with convertible notes

Convertible notes are another popular form of startup financing. Interest rates on convertible notes rose by 200 to 300 basis points, and discount rates climbed as high as 10.5 percentage points in larger deals. The choice between convertible notes and equity (through angel investor term sheets) depends on various factors, including the startup’s stage, the investor’s risk tolerance. Convertible notes work well with companies that expect to achieve a sizeable valuation upon the conversion – triggering equity round. For example, a tech startup that anticipates rapid growth in the next 1 – 2 years may find convertible notes more suitable as it defers the valuation discussion until a later stage.

Comparison Table

Feature	Angel Investor Term Sheets	Convertible Notes
Valuation	Negotiated upfront	Deferred until conversion
Equity	Granted immediately	Converted from debt later
Risk	Higher for founder in terms of equity dilution	Lower for founder in short – term

Impact of return expectations on negotiation

An investor’s return expectations significantly impact the negotiation process. If an investor expects a high internal rate of return (IRR), they may demand a larger equity stake or more favorable terms such as high liquidation preferences. IRR itself remains very useful, measuring the average return over the life of an investment and indicating the sensitivity of the net present value (NPV) to changes in the discount rate. For example, an angel investor who expects an IRR of 30% may be more aggressive in negotiating for better terms in the term sheet. Pro Tip: Founders should understand an investor’s return expectations early in the negotiation process and be prepared to present a counter – case based on the startup’s long – term potential.
Key Takeaways:

Valuation, equity percentage, and liquidation preferences are key elements in angel investor term sheets that often lead to negotiation.
The choice between angel investor term sheets and convertible notes depends on the startup’s stage and the investor’s risk tolerance.
Investor return expectations play a crucial role in shaping the negotiation process.
As recommended by industry experts, startups should carefully review and understand all aspects of an angel investor term sheet before signing. Top – performing solutions include seeking legal advice and benchmarking against similar deals in the market. Try our investment term sheet analyzer to better understand how different terms can impact your startup.

Convertible note strategies

In the dynamic landscape of startup financing, convertible notes have emerged as a popular choice. A recent report from HSBC Innovation Banking UK shows a significant rise in the percentage of deals at seed, Series A+, and Series C+ stages, highlighting the growing prominence of convertible notes in the market (HSBC Innovation Banking UK Report).

Issuance Volume

One of the most notable trends of 2025 is the surge in large – scale convertible issuances. In the first half of 2025 alone, 17 deals exceeded $1 million. This increase indicates a growing confidence among investors and startups in the convertible note model. For example, a tech startup in the fintech space was able to secure a large – scale convertible note deal. This allowed them to quickly access capital without going through the complex process of an equity round.
Pro Tip: If you’re a startup considering a large – scale convertible note issuance, it’s important to have a clear plan for how the funds will be used. This will not only attract more investors but also ensure the efficient use of capital.
As recommended by industry experts, startups should carefully analyze their growth projections before deciding on the volume of convertible note issuance. This can help in avoiding over – or under – capitalization.

Interest and Discount Rates

Interest rates on convertible notes have seen a significant increase. In fact, they rose by 200 to 300 basis points, and discount rates climbed as high as 10.5 percentage points in larger deals. This change in rates can have a substantial impact on both startups and investors. For instance, a high discount rate can be attractive to investors as it gives them more equity upon conversion. However, it also means that the startup will have to give up a larger portion of its ownership.
Pro Tip: Startups should negotiate the interest and discount rates carefully. It’s advisable to research the current market rates and use that data during negotiations.
A comparison table of interest and discount rates in different industries can provide valuable insights for both parties. This can help in understanding the industry benchmarks and making more informed decisions.
Key Takeaways:

The issuance volume of convertible notes has been on the rise, especially in large – scale deals in 2025.
Interest and discount rates have increased significantly, which impacts both startups and investors.
Startups should plan their issuance volume and negotiate rates carefully.
Try our convertible note calculator to estimate the potential impact of interest and discount rates on your startup’s equity.

SAFE agreement financing

In the fast – paced world of startup financing in 2025, SAFE (Simple Agreement for Future Equity) agreements have emerged as a dominant force. Carta data reveals that over 85% of pre – seed rounds now rely on SAFEs. This statistic showcases the growing preference for this financing method in the early stages of a company’s life.

Prevalence in Early – stage and Small Rounds

SAFEs have become particularly popular among AI startups, which often need to move quickly to capitalize on market opportunities. For instance, consider a hypothetical AI startup, Alpha AI. When Alpha AI was in its pre – seed stage, it used a SAFE agreement to secure funding rapidly. This allowed the founders to focus on product development rather than getting bogged down in complex equity negotiations.
Let’s look at some key elements of SAFEs. A SAFE is essentially an agreement between an investor and a startup. It gives the investor the right to convert their investment into equity at a future financing round. Unlike traditional convertible notes, SAFEs typically do not have an interest rate, which makes them an attractive option for early – stage companies with limited cash flow.
Pro Tip: If you’re a startup considering a SAFE agreement, make sure to clearly define the conversion terms. This can help avoid any misunderstandings with investors down the road.
As recommended by industry experts at HSBC Innovation Banking UK, understanding the implications of using SAFEs in your early – stage financing is crucial. The use of SAFEs may lead to dilution of equity for existing shareholders in future rounds, so it’s important to factor this into your long – term planning.
Top – performing solutions for companies looking to use SAFEs include consulting with experienced startup lawyers who can ensure the agreement is fair to both parties. Try using an online SAFE agreement generator to get a basic understanding of the structure and terms.
Key Takeaways:

85% of pre – seed rounds in 2025, as per Carta data, use SAFE agreements.
SAFEs are popular among AI startups for their speed and simplicity.
Define conversion terms clearly and consult with experts when using SAFEs to avoid future issues.

Series A funding alternatives

A new report from HSBC Innovation Banking UK reveals that the percentage of deals at seed, Series A+, and Series C+ stages are on the rise. This upward trend indicates a robust environment, but it also underscores the importance for startups to explore Series A funding alternatives.
As the market evolves, several options have emerged that can offer unique advantages over traditional Series A funding.

Convertible Notes

One of the notable Series A alternatives is convertible notes. In 2025, there has been a surge in large – scale convertible issuances. In the first half of 2025 alone, 17 deals exceeded $1 million (HSBC Innovation Banking UK Report). Interest rates on convertible notes rose by 200 to 300 basis points, and discount rates climbed as high as 10.5 percentage points in larger deals.
Convertible notes are suitable for companies that expect to achieve a sizeable valuation upon the conversion – triggering equity round. For example, a tech startup that has a clear roadmap to rapid growth in the next year might opt for convertible notes. They can raise funds now and convert the debt into equity at a later stage when their valuation is higher.
Pro Tip: When considering convertible notes, carefully assess your company’s growth potential and the expected valuation at the time of conversion. It’s also crucial to understand the interest and discount rate implications.

SAFE Agreement Financing

The Y Combinator – hosted SAFE (Simple Agreement for Future Equity) has become the investment contract of choice for many startup companies. A SAFE allows startups to raise capital without immediately determining the company’s valuation. This is beneficial for early – stage startups where valuation can be difficult to accurately assess.
Top – performing solutions include using a SAFE when you have a promising concept but limited operating history. It simplifies the investment process and provides flexibility for both the startup and the investor.
Pro Tip: Ensure that you fully understand the terms of the SAFE agreement, especially the conversion mechanics and potential dilution.

Venture Debt Financing

Venture debt can be another alternative to Series A funding. It provides additional capital without diluting equity as much as an equity round. However, it comes with its own set of challenges, such as repayment obligations.
For companies that have a steady cash flow and are looking for short – term capital to fuel growth, venture debt can be a viable option. For instance, a consumer goods startup that needs to ramp up production before the holiday season might use venture debt to finance inventory.
Pro Tip: Before taking on venture debt, conduct a thorough financial analysis to ensure your company can meet the repayment schedule.
The choice between these Series A funding alternatives depends on various factors, including the startup’s stage, the investor’s risk tolerance, and the company’s growth prospects. As recommended by industry experts, startups should carefully evaluate each option to find the best fit for their specific needs. Try our funding option calculator to see which alternative might be most suitable for your startup.
Key Takeaways:

The percentage of deals at various stages, including Series A+, is on the rise according to HSBC Innovation Banking UK.
Convertible notes, SAFE agreements, and venture debt are viable alternatives to traditional Series A funding.
Each alternative has its own advantages and considerations, and the choice should be based on the startup’s specific situation.

Venture debt financing

In today’s dynamic startup landscape, venture debt financing has emerged as a crucial component for many companies. A new report from HSBC Innovation Banking UK shows that the percentage of deals at various stages, including seed, Series A+, and Series C+, are on the rise, indicating the growing popularity of this form of financing.
Venture debt refers to loans provided to startup and growth companies. Unlike traditional debt, venture debt is designed to complement equity financing rounds. It can be used for a variety of purposes, such as funding working capital, expanding operations, or financing acquisitions.
One of the key advantages of venture debt is that it allows companies to conserve their equity. By taking on debt instead of raising additional equity, companies can avoid diluting the ownership stakes of their existing shareholders. This is particularly important for startups that have a high growth potential and want to retain as much control as possible.
For example, consider a startup that is in the process of scaling its operations. Instead of raising a large equity round, which would dilute the ownership of the founders and early investors, the company could take on a venture debt loan. This would provide the company with the necessary capital to fund its growth without giving up a significant portion of its equity.
Pro Tip: When considering venture debt financing, it’s important to carefully evaluate the terms of the loan. Pay attention to the interest rate, repayment schedule, and any covenants or restrictions that may be attached to the loan. Make sure you understand the implications of the loan on your company’s financials and long – term strategy.
In the current market, interest rates on convertible notes (a form related to venture debt in some aspects) have seen significant changes. Interest rates on convertible notes rose by 200 to 300 basis points, and discount rates climbed as high as 10.5 percentage points in larger deals (SEMrush 2023 Study). This shows that the cost of venture – related debt can be substantial, and companies need to be prepared to manage these costs effectively.
When it comes to the structure of venture debt financing, there are several key provisions to be aware of. On a term sheet, you will see provisions on everything from the price of the debt, the size of the round, the composition of the board, to liquidation preferences, drag – along rights, and more. These provisions can have a significant impact on the rights and obligations of both the company and the lender.
Top – performing solutions include working with lenders that have experience in the startup ecosystem. As recommended by industry experts, partnering with a lender that understands the unique challenges and opportunities of startups can make the process of obtaining venture debt much smoother.
Try our venture debt affordability calculator to see if your startup can take on venture debt responsibly.
Key Takeaways:

Venture debt financing is on the rise in the startup world, as shown by the HSBC Innovation Banking UK report.
It helps companies conserve equity by providing capital without diluting ownership significantly.
Interest rates on convertible notes and related debt instruments have increased, so cost management is crucial.
Be aware of the key provisions in venture debt term sheets, as they can impact the rights of both parties.

FAQ

What is a SAFE agreement in startup financing?

A SAFE (Simple Agreement for Future Equity) is an agreement between an investor and a startup. As Carta data shows, over 85% of pre – seed rounds in 2025 rely on SAFEs. It gives investors the right to convert their investment into equity at a future financing round. Unlike convertible notes, SAFEs usually lack an interest rate, ideal for cash – strapped early – stage firms. Detailed in our [SAFE agreement financing] analysis, it simplifies early – stage funding.

How to negotiate an angel investor term sheet effectively?

To negotiate an angel investor term sheet, start by gathering solid data. According to a SEMrush 2023 Study, startups with data are 30% more likely to reach a favorable deal. Focus on key elements like valuation, equity percentage, and liquidation preferences. Present revenue figures, user growth, and market comparisons. Also, understand the investor’s return expectations. Strategic negotiation is detailed in our [Angel investor term sheets] section.

Convertible notes vs. SAFE agreements: What’s the difference?

Unlike convertible notes, SAFE agreements do not have an interest rate. Convertible notes defer valuation until conversion and convert from debt later, while SAFEs give the right to convert investment into equity at a future round without immediate valuation determination. Convertible notes are suitable for companies expecting a high valuation at conversion, and SAFEs are popular in early – stage, small – round financing as detailed in [Convertible note strategies] and [SAFE agreement financing].

Steps for evaluating venture debt financing as a Series A alternative?

First, conduct a thorough financial analysis to ensure your company can meet the repayment schedule. Check for a steady cash flow, as venture debt suits companies needing short – term capital. Consider the loan’s terms, including interest rate, repayment schedule, and covenants. Partner with experienced lenders in the startup ecosystem. Venture debt details are in our [Venture debt financing] section.