📕 Startup term you should know

Ever heard of Average Deal Size (ADS) or Average Contract Value (ACV)?

This is the average price you're getting from each new customer who signs up. Tracking it shows you how well your sales team is performing and whether you're winning bigger deals (moving upmarket) or smaller ones (moving downmarket).

Your insider scoop: When ACV keeps climbing, that's usually a sign a company is doing something right. They’ve found customers who see serious value in what they are selling. SaaS guru Jason Lemkin even says young companies should aim to double their ACV every year and a half or so.

For investors: If a company’s deal sizes are shrinking, that could mean competitors are eating their lunch or that they’ve maxed out their potential market. Buyer beware!

📰 Today's topic: That SAFE you signed might tank your returns

If you're new to investing, newsflash: you're about to hear the word "SAFE" a lot.

It's a popular instrument for early-stage investments. But, there's a nuance that's often overlooked.

When you see "$5M valuation cap on a SAFE”, your FIRST question should be…pre-money or post-money?

Crazy enough, that word alone can (and will) dramatically change your returns.

Pre vs. Post and why it matters

Post-money is straightforward. If you invest $5k in a $5M post-money SAFE, you're buying exactly 0.1% of the company. Company exits at $50M? You get $50k back - a clean 10x multiple.

Pre-money is different. Your ownership depends on how much total money the company raises before SAFEs convert. Your actual multiple depends on variables you can't control.

And this is where your returns can get crushed.

The math that kills your multiples

Let's say you invest $5k on a $5M pre-money SAFE. You model a $50M exit = 10x return.

But your actual multiple depends on how much more the founder raises after you invest.

Scenario 1: Founder raises $300k total. You convert at 0.094%. A $50M exit = $47k return = 9.4x multiple.

Scenario 2: Founder raises $2M total. You convert at 0.071%. Same $50M exit = $35.5k return = 7.1x multiple.

Same SAFE and same exit, but your multiple dropped from 9.4x to 7.1x based on something you couldn't control.

And realistically, you won't know which scenario you're in until 18+ months later when conversion happens.

I've seen angels end up with 30-50% lower multiples than they calculated, and it's not because founders were dishonest. It's because they raised more than initially planned - and every additional dollar on a pre-money SAFE reduces your returns.

The post-money solution

With post-money, when you invest $5k at a $5M cap, you're locking in 0.1% ownership. Period.

Company exits at $50M? You get $50k back - a 10x multiple (assuming no priced round has been raised), regardless of what happened after you invested.

Other SAFE holders also won't dilute you; only the next priced round will.

This is why post-money SAFEs became the standard. You can actually calculate your ownership before you wire the money.

What to do about it

Before you sign any SAFE, ask: is it pre-money or post-money?

If it's post-money, you're good. You know how much of the company you’ll own.

If it's pre-money, ask the founder: "How much are you planning to raise in this round?" And then think through what would happen if the founder decides to double that.

Stay SAFE out there.

– Brian from Angel Squad

🪽 Angel Investors Come from Everywhere

Spoiler alert: You don't need to be in Silicon Valley or have a trust fund to be a great angel investor.

Robert Rizea | London, England

Ex-Pro Tennis Player → Growth Leader → Exited Founder

Robert began his career as a professional tennis player, then transitioned into marketing where he became Head of Performance at Bark.com. He went on to co-found and scale RacketPal, which grew into the largest racket sports platform in the UK, connecting 100s of thousands of players and ultimately exiting.

Why this matters: Robert’s journey blends the drive of a professional athlete, the analytics of a performance marketer, and the resilience of a founder who has built and exited. His sports background gives him unique insight into behaviour, motivation, and community building - which is an angle few pure-tech operators/investors can match.

Robert is in our angel investing community, Angel Squad. Small Bets subscribers can grab a guest pass to join them.

Overheard in SF…probably

“We're not raising money - we're selling equity in the future of humanity. Our valuation is based on the GDP of Mars in 2157.”