Founders! Are you sure you need to do a priced round?
Bootstrapping, SAFE notes, and why I believe founders have better options than the path we were all told to follow.
About 11 years ago, when I was co-founder of an ad tech company, raising money meant a parade of institutional meetings, lawyers, and more process than product. We needed millions up front, just to have the basic technology to compete. There weren’t a lot of choices. It was institutionals or bust. You took the money, gave up more control than you wanted, lost time and sleep to paperwork, and steeled yourself for dilution. For years, I assumed it had to be this way.
But when I look at what we’re doing now at FOMO.ai, I realise the landscape has shifted. The truth is stark: a priced round is no longer the only, or the best, option for most founders, especially if you’re not playing the unicorn game. Most days, I find myself quietly grateful for this fact. And a bit bewildered that so many founders still feel compelled to chase the old milestones.
Here’s what I believe now: If you’re not laser-focused on building a unicorn, alternative funding structures, especially SAFE notes, offer founders more flexibility, cleaner cap tables, and the chance to keep control. You’re not obliged to play the “Series A, B, C” LinkedIn victory-lap game just because that’s what everyone before you did.
Bootstrapping First, But What If You Need Capital?
Let me be blunt: if you can bootstrap, bootstrap. That will always be the best path in most cases. Yes, I know some VCs even say this out loud, even if it’s bad for their deal flow. I once heard a VC in Boulder admit, “We want to invest in businesses that don’t need our money,” and that says a lot. The best businesses are the ones that don’t depend on outside capital, and every founder secretly knows it.
But real life is messy. Sometimes, you do need external capital to get out of the starting gates or to reach the next hilltop. That’s where founders get told, again and again, to default to priced rounds. I’m here to tell you there’s a better way.
SAFE Notes Changed the Game for Us
At FOMO.ai, every dollar we’ve raised has come through SAFE notes, always with a post-money valuation cap.
Here’s what that means for us. First, SAFE notes are genuinely easy. We use the Y Combinator post-money SAFE format, which slashed our legal costs and admin overhead. Sure, the Form D for the SEC is still required, but that’s a blip compared to the mountain of paperwork for a traditional convertible note or a full-priced round.
Why does this matter? Because when you’re an early-stage founder, every hour you spend with lawyers or wrangling admin is an hour you’re not talking to customers, building product, or recruiting the early believers who will actually move you forward.
But there’s more. SAFE investors don’t technically appear on our cap table. Instead, our table only shows the actual owners, me, my co-founder, and a small cluster of core team members. That’s it. Our investors are all individuals at this stage, and SAFE notes have also simplified things for them. No arcane legal rights to negotiate, no practical hurdles that scare away people who want to write smaller checks.
Critically, by choosing post-money SAFEs, our investors don’t get diluted by each other when we do multiple SAFE rounds. Unless we eventually convert to a priced round, they avoid that invisible dilution spiral that plagues pre-money structures. And frankly, as long as we stay with SAFE notes, that non-dilution advantage sticks with them right up until exit.
Raising Money Little by Little, And the Lessons That Came With It
Of course, nothing is perfect. Raising exclusively from individuals on SAFE notes has its unique set of headaches. Most of our investments were in increments of $25,000 - $250,000. That forced us to constantly be out in the world, pitching, courting, and convincing.
Looking back, I wish I’d invested more effort up front to put together a larger chunk of capital. It would have saved me weeks of time by avoiding the constant fundraising treadmill. There’s something to be said for gathering a big enough war-chest early, if you can do it without taking on more complexity than you want.
And if you do raise over time, as we did, you can keep increasing your valuation for less dilution down the line.
But there’s an upside. When institutional investors started circling, they liked what they saw. “You’ve only raised on SAFEs? Your cap table only shows the founders and a handful of core employees? That’s rare.” We had a clean, simple setup, one that’s almost impossible to maintain if you go down the priced round route early.
Founders and the Unicorn Trap
Every week, I see founders cheering online after closing their Series A, B, or C. There’s a cultural expectation in the US, probably driven by years of Valley folklore, that the path to success is paved with increasingly large, priced rounds. Get the seed. Get Series A. Hustle to B. Repeat. And if your “big number” goes up, you must be winning. Right?
I strongly question it.
If you’re building a business that truly needs $10 million-plus to have a shot, maybe you’re chasing a unicorn or playing in spaces where scale is do-or-die, then sure. Priced rounds are your reality, and SAFEs won’t get you all the way there.
But most of us aren’t actually building those businesses. At FOMO.ai, we’re not on the unicorn racetrack. We have a clear plan for an exit in the next 18 to 24 months at a multiple that will delight our investors. For that kind of target, SAFEs are plenty. If your total capital need is “several million” not “tens of millions,” ask yourself whether the dilution and control give-up of the legacy VC path really makes sense.
Truth is, if you can build a cash-generating business from day one, why chase increasingly big checks and shrink your own slice of the pie each time? Most of the time, it’s founder ego and external validation at play, not genuine necessity.
But SAFEs Aren’t One-Size-Fits-All, Read the Fine Print
Here’s where you need to be sharp: not all SAFE notes are created equal. So far, we’ve always used a valuation cap and stuck with the post-money format. That’s worked out because we understood exactly how it would convert, how shares issued lined up with shares authorised, and what it meant for us come exit or priced round.
But SAFE structures are flexible, which means you can get into trouble if you don’t understand the levers.
Some founders just use a discount, often 20 percent, which kicks in at exit or priced round. Others combine a valuation cap and a discount. Still others offer a SAFE that accrues interest and has a forced conversion on a specific date. Each option shifts the risk and upside between you and your investors.
My strong view: if you can, stick to just one variable, ideally the valuation cap. If you have to concede a second, say, adding a discount to the cap, it’s less ideal, but still manageable. The scenario I’d personally avoid is a SAFE with a forced expiry that triggers conversion, especially early on when your business is still finding its shape and timing is a moving target. Controlling the timing of conversion is strategic, so don’t surrender it lightly.
Valuations: More Art (and Nerve) Than Science
Let’s talk about setting the valuation cap, because this is where most founders stress out. I stumbled on a guy on TikTok who said that “an established company is valued by standard metrics like revenue, retention, gross margin, etc, but an early-stage startup’s valuation is determined in direct correlation to the size of the testicles on the founder.” Crude, a bit, but there’s real truth there. Early-stage valuations are subjective and largely depend on how confidently you defend your progress & vision.
We started at a $7.5 million post-money cap, which is about the norm. I’ve seen Founders go down to $4 million, others shoot for $10 million or more. I felt good about $7.5 million because my co-founder and I brought significant relevant experience, less risk for investors, and therefore more reason to push for the higher end. As we de-risked the business, began generating revenue quickly, and knocked off some high-uncertainty early milestones, we felt completely justified in bumping the cap to $12.5 million, then $15 million, then $20 million. Progress breeds leverage.
So, let the market validate your price to some degree, but don’t be afraid to hold your line, especially if you’ve got genuine traction or differentiation.
Why This is the New Normal (For Most Startups)
The shift didn’t just happen because founders woke up braver one day, the game itself has changed.
Back when I was part of that ad tech company, we needed significant funding because it took $millions to build even a basic tech platform. Today, thanks to AI and available tooling, we were able to generate revenue at FOMO.ai within 60 days of launching. That early revenue kept the lights on, and actively funded our technology. Building software is faster and cheaper than ever.
Today, the real struggle isn’t technology, it’s distribution.
(Read: The hard part has changed (technology —> distribution))
Getting your product seen and used is the big challenge, not building the thing in the first place. The old paradigm, big up-front money, institutional-only backers, priced rounds by default, just doesn’t fit that world anymore.
More founders in my circles are waking up to this. Instead of chasing priced rounds for validation, they’re choosing cleaner, more manageable cap tables and flexible funding that matches their actual business needs. Investors are getting it too. Some even worry about deal flow because founders aren’t queuing up for the expensive old model.
This is becoming the new normal, at least for companies whose ambition and capital needs sit somewhere south of moonshot territory.
What You Can Use Today
Here’s my distilled advice for founders right now:
Bootstrap if you can. Real freedom starts there.
If you need to raise, look at SAFE notes before defaulting to priced rounds.
Keep your SAFE terms simple. One lever (ideally the valuation cap), occasionally two (add a discount if you must). Avoid forced conversion dates unless absolutely necessary.
Use post-money SAFEs to keep your investors aligned and prevent them from being diluted by each other.
Aim for a clean cap table. It makes you more attractive to future investors and saves admin pain later.
Set your valuation cap with confidence, and let your progress justify raising it as you go.
Understand your business goals. If you’re building for acquisition within a few years rather than chasing unicorn status, you don’t need the baggage (and dilution) of the “old path.”
Raise bigger early if possible. Constantly doing lots of small rounds eats up time. See if you can get a critical mass up front.
If You Only Remember One Thing...
You do not have to follow the legacy playbook of priced rounds and endless dilution. For the majority of founders today, SAFE notes and, more broadly, flexible investment structures offer a smarter, cleaner, and more founder-friendly path. Your business type and ambition should drive your funding choices, not cultural inertia or ego.
Dax is the Co-Founder & CEO @ FOMO.ai, and the author of 84Futures.com. This post was helped by Hello Gordon, the easiest way to articulate your expert knowledge.
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