Episode Summary:Understanding how to invest in startups requires more than just writing a cheque. Cheryl and Maxine break down the legal structures behind startup investing, covering SAFE notes, convertible notes, and priced rounds. Whether you're a seasoned investor or just starting out, this episode unpacks the key terms, investor-friendly vs. founder-friendly clauses, and the risks involved. They discuss the evolution of SAFEs, why they've become the dominant structure in early-stage funding, and the critical differences between pre-money and post-money SAFEs. Plus, they explore the role of pro-rata rights, most favoured nation (MFN) clauses, and side letters—so you don’t get caught off guard in your next deal. If you’ve ever wondered how to protect your equity position, when to push back on certain terms, or what legal documents you’ll actually be signing, this episode is your investor cheat sheet. Key Takeaways:00:00 – Why startup investment structures matter 01:45 – SAFE notes, convertible notes, and priced rounds explained 03:47 – How founders raise money: equity vs. debt 06:21 – The documents you’ll sign in a priced round 10:22 – Do startups need a constitution? Red flags to watch for 14:29 – Side letters: What are they, and should you be worried? 19:08 – Pro-rata rights & why they matter for investors 22:23 – Most Favoured Nation (MFN) clauses explained 30:27 – Pre-money vs. post-money SAFEs: Which one is better? 38:03 – Why valuation caps and discounts can be a double-edged sword 43:53 – Investor-friendly vs. founder-friendly terms: What’s fair? Resources- A Deep Dive into ECIS, ESVCLP, and Investment Strategies - https://open.spotify.com/episode/1Agiu4dskF53m6DBZgXitD?si=KFeAlY_wTjSwOWfRMiiQFA - Angel Academy – The most comprehensive angel investing course for Australia & NZ: www.venture.academy - Aussie Angels – Cheryl’s platform for angel investing https://www.aussieangels.com/ - Co-Ventures – Maxine’s venture capital firm https://www.coventures.vc/ Sponsors:First Cheque is supported by our wonderful sponsors:Vanta: Join 7,000 global companies like Atlassian and Dovetail that use Vanta to build trust and prove security in real time. Get 10% off https://dayone.fm/vanta Rocking Horse: Rocking Horse helps startups access their R&D tax rebate early. Get up to $3M in non-dilutive finance, solve cash flow challenges, and accelerate growth. Easy application, fast approval. Smart investment for innovative startups. https://dayone.fm/rockinghorse Galah Cyber: Galah Cyber are perfect for founder-lead and SAAS businesses. Galah provides advice, education, and training. Get in touch with Galah Cyber for a complimentary call to make sure you’re secured. https://dayone.fm/galah The Day One NetworkFirst Cheque is part of Day One, the podcast network dedicated to founders, operators & investors.To learn more, join our newsletter to be notified of new and upcoming shows. The only content we create is content that will help Australian founders. If you want to learn about upcoming guests and when a new First Cheque episode is available, join the First Cheque newsletter. Mentioned in this episode: Aussie Angels - the preferred fund and syndicate admin platform for emerging managers in Australia Show Notes: If you’re an investor or keen to write your first angel check, please check out some of the syndicate tickets on www.aussieangels.com a...