Deal structures
Selling a SAFE or Convertible Note, Not Shares
When there's no stock to transfer yet, because the instrument hasn't converted.
Many angel investments are SAFEs or convertible notes, not priced-round stock — which means the investor doesn't actually hold shares to sell. A "secondary sale" of a SAFE is really an assignment: the buyer takes over the original investor's contractual position, including its cap and discount terms, and steps into the seller's shoes for whatever equity the instrument eventually converts into.
This is mechanically different from a stock sale and usually requires the company's consent to the assignment, since most SAFE and note templates restrict transfer without it.
How it works
- Buyer and seller agree a price for the SAFE or note itself, typically reflecting how much the company has appreciated relative to the instrument's original cap.
- The company consents to the assignment — most standard SAFE templates require this.
- The buyer signs an assignment agreement taking over the original investor's position, cap, discount, and all.
- When the instrument eventually converts (typically at the next priced round), the buyer — not the original seller — receives the resulting shares under the original terms.
Worked example
An investor holds a SAFE with a $1,000,000 valuation cap, originally invested at $25,000. The company has grown substantially since; a buyer purchases (assigns) the SAFE for $60,000.
- Original SAFE investment
- $25,000
- Original valuation cap
- $1,000,000
- Price paid by buyer for the assignment
- $60,000
- Cap and terms buyer inherits
- Same $1,000,000 cap, unchanged
- Seller's gain on the assignment
- $35,000
Why it matters: The buyer is paying a premium today ($60,000) specifically to lock in the original, more favorable $1,000,000 cap — which only pays off if the company's eventual priced round comes in meaningfully above that cap.
Watch out for
- Confirm the specific SAFE or note's transfer-consent language before assuming an assignment is even possible — some templates restrict it more tightly than others.
- A SAFE has no guaranteed conversion date — you're buying a contractual right to future equity, not equity itself, and that conversion could be years away or, in a shutdown scenario, never happen.
- QSBS treatment questions get even more fact-specific with an assigned SAFE — see the QSBS deep dive, and confirm directly with a tax advisor.