Several structural shifts are shaping the way capital flows in 2025:
- Founder preferred stock is on the rise, featured in nearly 11% of companies that closed priced equity rounds in H1, up from 6% in 2023. These provisions often support tax-efficient founder liquidity structuring and may signal that founders anticipate longer timelines to exit.
- Secondary deals are gaining traction, with nearly 29% of such transactions priced at a premium to the last preferred round’s price. While average tranche sizes remain modest ($1.2 million–$1.4 million), sentiment is improving. Companies founded in 2020 are driving much of this activity, likely due to early employee equity vesting schedules and QSBS timelines.
- SAFEs now dominate pre-seed deals, where they are used in over 91% of investments. Cap-only SAFEs remain the preferred structure, but valuation caps are tightening, especially for large SAFEs over $5M, where median caps dropped by over 30% quarter-over-quarter. Convertible notes are also declining in valuation caps and usage.
Key Takeaway: With longer timelines and shifting leverage, deal terms are evolving to meet the moment. Founders and investors alike are finding creative ways to balance liquidity, risk, and growth.
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