What’s the Difference Between ASA, SAFE and Other Convertible Instruments for Raising Your Round?

For UK startup founders navigating early-stage fundraising, choosing the right investment instrument can feel like trying to pick a route through fog. Do you go for an ASA to qualify for SEIS? A SAFE to keep things simple? Or a Convertible Loan Note for flexibility? Each option has trade-offs — legal, financial, and strategic. In this article, we break down the pros, cons, and best use cases for each convertible instrument to help you raise with confidence.

The Rise of Convertibles in Startup Fundraising

Convertible instruments have become a mainstay in early-stage rounds, particularly in pre-seed and seed. Why? They’re fast to execute, cheaper in legal fees, and don’t require you to pin down a company valuation prematurely — an often painful process when traction is early and markets are uncertain.

For founders operating in the UK's fragmented fundraising landscape, these tools can help move deals faster and widen access to capital. But knowing which one to use — and when — is critical.

What Is a Convertible Instrument?

A convertible instrument is a form of investment that converts into equity at a later stage, typically when your next funding round happens. Unlike priced equity rounds, where the valuation and ownership are established upfront, convertibles defer this step.

Common Traits

• Used for early-stage funding (pre-seed or seed)
• Avoid negotiation over valuation
• Lower legal costs
• Often used to bridge between rounds or bring in strategic angels early

ASA (Advanced Subscription Agreement)

Origin:

A UK-specific agreement, the ASA was developed to align with SEIS/EIS tax relief schemes, which are a major draw for early-stage angel investors.

Key Features:

• Not a loan — it's a subscription for future shares
• No interest, no repayment
• Typically must convert within 6 months for EIS/SEIS eligibility
• Usually converts at the next qualifying equity round

Pros:

• Compliant with SEIS/EIS tax relief schemes
• Straightforward for UK investors and founders
• Simple legal structure

Cons:

• Must convert (no option to repay)
• Timelines are tight if round completion is delayed

Ideal Use Case:

You're raising from UK angel investors who want SEIS/EIS tax relief and you plan to close a priced round within six months.

SAFE (Simple Agreement for Future Equity)

Origin:

Created by Y Combinator in the US, SAFEs have spread globally due to their simplicity and founder-friendliness.

Key Features:

• Non-debt instrument
• No interest, no maturity date
• Converts into equity at a future financing round
• Can include a valuation cap and/or a discount

Pros:

• Extremely simple, especially for small or international rounds
• No repayment pressure
• No need for SEIS/EIS compliance if not relevant

Cons:

• Not SEIS/EIS compatible — a major issue for UK-based angel investors
• Some UK investors unfamiliar with the structure

Ideal Use Case:

You’re raising from international investors or accelerators who don’t require SEIS/EIS relief and prefer founder-friendly terms.

Convertible Loan Notes (CLNs)

Origin:

More traditional than SAFEs or ASAs, CLNs straddle the line between debt and equity.

Key Features:

• Convertible into equity OR repayable
• Carries interest and a maturity date
• Often used in bridge rounds

Pros:

• More appealing to risk-averse investors
• Can delay valuation further if needed
• Flexible triggers for conversion

Cons:

• Typically not SEIS/EIS compliant
• Can burden the startup with repayment obligations
• Adds legal complexity (it’s a debt instrument)

Ideal Use Case:

You’re doing a bridge round and need institutional or family office participation before a larger Series A.

Choosing the Right Instrument: What to Consider

Additional Considerations:

• Round timing: Will you close a priced round within 6 months?
• Investor profile: Do your investors want SEIS/EIS relief or just speed?
• Risk appetite: Are you okay with possible repayment clauses?

Pick the Right Tool, Not the Trend

Convertible instruments are powerful tools — but only when used in the right context. The wrong choice can slow down a raise or cost you investor interest.

ThatRound helps founders navigate the full spectrum of fundraising options — from choosing a structure to selecting a partner to execute it. With transparency at the core, we’re here to simplify what has historically been a black box.

Legal Support: Who to Turn To

ThatRound does not provide legal advice and does not list legal service providers on the platform. The information provided in this article is for general informational purposes only and should not be relied upon as a substitute for professional legal advice. If you are unsure which instrument is appropriate for your round, please consult a qualified solicitor or legal advisor. Our partners:

• FounderCatalyst: Providing fixed-fee fundraising legal support and advice for early-stage startups, templates for ASA/SAFE, and SEIS/EIS application handling.
• Harbottle & Lewis: A top-tier full-service law firm providing comprehensive and tailored legal support and advice to emerging companies and the founders behind them, with extensive experience advising on ASAs, SAFEs, CLNs as well as larger equity fundraisings from pre-seed to series B and beyond.

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