Who pays legal fees in a convertible note or SAFE financing and how much does it cost?

Takeaway: In early-stage financings using the Y Combinator SAFE, the company pays its own legal costs, and investors typically do not ask the company to cover theirs. Legal expenses are modest compared to priced equity rounds - often in the low four to five figures - because the documents are standardized and rarely negotiated.

For a founder raising an early round with SAFEs or convertible notes, one of the first practical questions is: who pays the lawyers, and how much will this cost? Unlike a priced equity round, where legal fees can run into six figures, early-stage convertible or SAFE financings are designed to be fast and inexpensive.

Legal Fees in SAFE Financings

  • Company Pays Its Own Counsel: In a standard YC SAFE financing, the company covers the cost of its own legal work—drafting and managing the SAFE documents, updating the cap table, and handling state and federal securities filings.

  • Investors Pay Their Own Counsel (If Any): Investors almost never require the company to pay their legal expenses in a SAFE or note financing. The documents are standardized, and most investors (including top seed funds) are comfortable signing without significant negotiation.

Typical Costs

Because SAFEs are short and non-negotiable by design, legal work is limited. Costs usually include:

  • Preparing the SAFEs and board/stockholder approvals.

  • Updating or creating the cap table to reflect new investments.

  • Handling securities law compliance filings (such as Form D and state blue sky notices).

Typical cost range:

  • $5,000 – $15,000 in legal fees for a straightforward institutional SAFE round.

  • Angel SAFE rounds are often less expensive, sometimes just a few thousand dollars, since they usually involve a small number of investors and little to no negotiation.

  • Costs increase if there are many investors, unusual side letters, or if the company’s corporate records need cleanup before closing.

By contrast, a priced equity financing (Seed Preferred or Series A) usually involves detailed stock purchase agreements, investor rights agreements, and other long-form contracts - and it is customary for the company to pay not only its own counsel but also a capped portion of the lead investor’s legal fees (often $30,000–$50,000 or more).

Why This Matters

Keeping early financing costs low is one of the key advantages of using SAFEs or convertible notes. Founders should budget for their own legal fees but can assume investors will handle theirs. If an investor asks the company to cover their legal fees in a SAFE round, it’s a departure from market practice and a potential red flag.

Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.