Of course it's still possible to get more dilution than expected if you raise at unrealistically high caps (or uncapped!) and convert at a lower valuation down the road, but even that is probably less painful than a conventional down round.
The biggest benefits of the note structure to us were a) Rolling close b) Not wasting time debating "valuation" when neither us nor the angels were capable of estimating a number with limited to no data.
In what way is the cap not a "valuation"?
I'd defer to Paul's point that choosing a too high (or non-existent) cap makes no sense. We did have to negotiate our cap and we set it so that we had a realistic shot of hitting 2-3x that in Series A pre money which in my mind is why an angel should be investing. I'd personally consider it a disappointing outcome if I raised at my cap and I'd hope my investors would as well.
A cap is not a valuation and I agree that everyone thinking it is, is a problem.
1) For a VC: more performance info / better access to the A.
2) For an angel: most angels won't have access to the A, so seed rounds are their chance to invest early in a potentially VC track company.
+100 on this. This is particularly problematic in India where most early stage investing is priced. The opportunity to bully founders to accept weird valuation terms is limitless.
notes are a trade-off of current capped valuation for future capped dilution. Guess which one gets misused by investors ?
Mysteriously, the only people who oppose SAFE notes are investors who would like you to instead enter a complex negotiation with them!