Convertible instruments held steady in Q1 2025, but the terms are shifting in favor of investors. 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.
Valuation caps are also dropping, particularly in raises over $5 million, but that hasn’t slowed simple agreement for future equity (SAFE) usage. In fact, cap-only SAFEs became even more dominant, used in 81% of deals (up from 76% in 2024), reinforcing valuation caps as the go-to pricing tool for early-stage risk.
Convertible bridge rounds remain common among post-Series A companies looking to avoid priced rounds in a volatile market. If uncertainty continues, SAFEs and notes may remain in heavy rotation but with increasing complexity and less founder-friendly terms.
Get the full AI outlook in the Venture Beacon Q1 2025 report.
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