With Y Combinator’s Demo Day taking place at Pier 48 in San Francisco next week, its largest batch of companies ever is getting ready to present to an audience of select investors. Having taken Atrium through Demo Day myself, I have first-hand knowledge of the process. When the founders have finished their pitches, the time to talk numbers will closely follow. Chief among the many decisions founders will face during this time is whether to opt for the Pre-Money SAFE or the new Post-Money SAFE, the two standardized legal documents that YC has introduced in recent years.

Both versions are meant to make the process fast, easy and fair for both parties in the early-stage fundraising process. But there are crucial differences between the two that founders should examine carefully.

Essentially, the Pre-Money SAFE is exceptionally favorable to founders because it gets them pre-valuation funding like a convertible note, but debt-free. The Post-Money SAFE sweetens some of the terms for investors, like locking in their percentage ownership in a priced round later on.

Overall, we expect the Post-Money version to become more common, especially if the company is raising a round above $1 million or $2 million, and the investors have more leverage to ask for it in the negotiation.

(Note: This article is aimed at giving founders a general understanding of the changes from Pre-Money SAFEs to Post-Money SAFEs. The information provided is based on my professional experience and opinions, and should not be used without careful consideration and advice by qualified advisors and legal counsel. Also, to learn more and ask questions about Pre and Post-Money SAFEs, join me on April 16th for a webinar where I’ll dive in a bit deeper.)

Today there are two general ways of structuring a startup fundraising round. The first can be called a “priced equity round,” and is characterized by the sale of preferred stock with a fixed valuation.