Model post-money and pre-money SAFE conversions, visualize cap table dilution, and compare ownership scenarios
This calculator models how SAFE (Simple Agreement for Future Equity) notes convert to equity when a priced financing round or acquisition occurs. Understanding these mechanics is essential for founders and investors to accurately project ownership and dilution.
Post-money SAFEs, introduced by Y Combinator in 2018, are now the industry standard. The post-money valuation cap includes all SAFE investments, providing investors with guaranteed ownership percentages regardless of how many SAFEs the company issues.
The conversion formula for post-money SAFEs is straightforward: SAFE Investment / Post-Money Valuation Cap = Ownership Percentage. For example, a $500,000 investment on a $5,000,000 post-money cap guarantees 10% ownership. The calculator determines the conversion price by dividing the cap by the post-money capitalization (existing shares + SAFE shares + new investor shares).
When a discount rate applies, the calculator compares: (1) the price per share using the valuation cap, and (2) the price per share with the discount applied to the Series A price. The SAFE converts at whichever price is lower, giving the investor more shares.
Pre-money SAFEs, which were the original Y Combinator standard, convert based on the company's valuation before new investment is added. This creates less predictable ownership for investors because the pre-money cap doesn't include other SAFE investments.
The conversion price for pre-money SAFEs is calculated using the existing capitalization only, not including other SAFEs. This typically results in more shares for investors compared to post-money SAFEs with the same cap, making pre-money SAFEs more investor-friendly.
When multiple pre-money SAFEs exist, they all convert on the same pre-money capitalization, compounding dilution for founders. This is why pre-money SAFEs are often called "founder-unfriendly" despite their simpler structure.
The calculator generates detailed cap tables showing ownership before and after conversion. For equity financing rounds, it calculates: founder shares, SAFE conversion shares, option pool shares, and new investor shares. For acquisitions, it calculates the liquidation preference and distribution of proceeds among shareholders.
The pie charts provide visual representation of ownership distribution, making it easy to compare scenarios and understand the dilution impact of different SAFE terms.
This calculator uses standard SAFE conversion mechanics as defined by Y Combinator's published documentation. The calculations assume: standard preferred stock conversion, no pro-rata rights exercised, and standard anti-dilution provisions. For more complex scenarios involving multiple SAFE tranches, side letters, or unusual terms, consult with legal counsel.
Before signing a SAFE, use this calculator to understand the ownership implications of different valuation caps and discount rates. Model various scenarios to find terms that work for both founders and investors. A $2M cap versus a $5M cap has dramatically different outcomes - this calculator shows you exactly how much.
When investors propose terms, input them into the calculator to see your projected post-conversion ownership. Compare multiple term sheets side-by-side by running the calculator with different inputs. This helps you negotiate from an informed position rather than accepting terms you don't fully understand.
If you're planning to raise multiple SAFE rounds before a priced Series A, use this calculator to model the cumulative dilution. Stack multiple SAFEs to see how they interact - for post-money SAFEs, each additional SAFE dilutes existing SAFE holders, while pre-money SAFEs stack additively.
The calculator helps you determine how much to raise and at what cap to maintain your target ownership. Work backward from your desired post-Series A ownership to find the maximum SAFE dilution you can accept before your priced round.
Before entering Series A negotiations, model how your outstanding SAFEs will convert at different valuations. This affects your negotiating leverage - a higher Series A valuation may trigger caps, while a lower valuation may trigger discounts. Understanding these mechanics helps you set appropriate valuation expectations.
Share the calculator output with incoming investors to ensure alignment on the fully-diluted cap table. Series A investors often want to understand the SAFE stack before setting terms.
If an acquisition offer arrives before you've done a priced round, this calculator shows how SAFEs convert in a change-of-control event. Some SAFEs have special provisions for acquisitions below the cap - model these scenarios to understand payouts to all stakeholders.
The acquisition modeling feature shows the distribution of proceeds based on SAFE liquidation preferences, helping you evaluate whether an acquisition makes sense for all parties.
Investors can use this calculator to verify conversion mechanics before investing. Input the company's existing cap table, outstanding SAFEs, and proposed terms to see your projected ownership. Compare post-money versus pre-money structures to understand the risk-reward tradeoff.
Law firms, accelerators, and startup education programs can use this calculator to teach SAFE mechanics. The visual output makes complex concepts accessible, helping new founders and investors understand how SAFEs actually work in practice.
A SAFE (Simple Agreement for Future Equity) is a financing instrument created by Y Combinator in 2013 to simplify early-stage startup investment. Unlike convertible notes, SAFEs are not debt - they have no maturity date, no interest rate, and don't require repayment. Instead, SAFEs give investors the right to receive equity in a future priced financing round.
SAFEs are popular because they're fast to execute (typically 2-5 pages), have low legal costs ($0-$2,000 versus $10,000+ for a priced round), and avoid the complexity of setting a valuation at an early stage. However, their simplicity can mask significant differences in terms that affect both founders and investors.
The valuation cap is the maximum valuation at which the SAFE will convert to equity. If the priced round valuation exceeds the cap, the SAFE holder converts at the cap, effectively getting a discounted price per share. The cap represents the "ceiling" on conversion valuation.
Example: With a $5M cap and a $15M Series A valuation, the SAFE holder converts at $5M - paying 1/3 the price per share that Series A investors pay. This 3x discount rewards early investors for taking more risk.
Caps should be negotiated based on: current traction, comparable SAFE raises, expected timeline to priced round, and the company's risk profile. Typical seed caps in 2025 range from $5M to $25M depending on the market and company.
This distinction is critical and often misunderstood. A post-money cap includes the SAFE investment itself - so a $500K investment on a $5M post-money cap means 10% ownership is guaranteed. A pre-money cap excludes the investment, meaning the same terms could result in different ownership depending on total capital raised.
Post-money SAFEs provide certainty for investors but can create complexity for founders managing multiple SAFEs. Each new post-money SAFE dilutes previous SAFE holders, while pre-money SAFEs stack additively without diluting each other.
Since 2018, YC has recommended post-money SAFEs as the standard, and most institutional investors now use this structure. If you're offered a pre-money SAFE, understand that it's generally more favorable to investors.
A discount rate gives SAFE investors a percentage reduction on the price per share in the next priced round. A 20% discount means SAFE holders pay 80% of the Series A price. The SAFE converts at whichever mechanism (cap or discount) produces more shares for the investor.
Discounts are becoming less common as caps have become the primary pricing mechanism. When both exist, the discount serves as a "floor" on the SAFE holder's benefit - even if the priced round is below the cap, the SAFE holder still gets the discount advantage.
SAFEs typically convert upon three types of events: (1) Equity Financing - when the company raises a priced equity round above a specified threshold (often $1M), the SAFE converts to the same class of stock issued in that round. (2) Liquidity Event - if the company is acquired or goes public before a priced round, the SAFE converts and participates in the proceeds. (3) Dissolution - if the company shuts down, SAFE holders may receive their investment back before common shareholders (depending on SAFE terms).
Unlike convertible notes, SAFEs have no maturity date. If none of these events occur, the SAFE remains outstanding indefinitely. This is good for companies (no debt pressure) but creates uncertainty for investors.
Pro-rata rights give SAFE investors the right (not obligation) to invest in future rounds to maintain their ownership percentage. Many SAFEs include pro-rata rights for investments above a threshold (typically $100K-$250K).
Pro-rata rights can significantly impact cap tables. If all SAFE investors exercise pro-rata in Series A, founder dilution increases. This calculator doesn't model pro-rata exercise, but it's an important consideration for fundraising planning.
An MFN clause allows early SAFE investors to adopt more favorable terms if the company issues subsequent SAFEs with better terms. If an investor holds a $6M cap SAFE and the company later issues a $4M cap SAFE, the MFN clause lets the first investor convert at the lower $4M cap.
MFN clauses protect early investors from being disadvantaged by later, more favorable deals. They're standard in most SAFE templates but can complicate cap table management.
The most expensive mistake founders make is not understanding the difference between post-money and pre-money SAFEs. A $10M post-money cap means the SAFE investment is included in that $10M. A $10M pre-money cap means the $10M is the company's value before the SAFE investment, resulting in higher ownership for investors.
Always clarify which structure you're using. Since 2018, YC's standard SAFE is post-money, but some investors still use pre-money structures. Read the actual SAFE document - the title and introductory language should specify the structure.
SAFEs feel like "free money" because there's no immediate dilution visible on your cap table. This leads some founders to raise excessive amounts on SAFEs, only to be shocked when they all convert at Series A. If you raise $3M on SAFEs with a $10M cap, that's 30% of your company before you've even started negotiating with Series A investors.
Use this calculator to model your fully-diluted cap table before accepting additional SAFE investments. Know your total SAFE exposure and plan accordingly.
When a SAFE has both a cap and a discount, the investor gets whichever produces more shares. Founders sometimes think the discount only applies if the valuation exceeds the cap - this is wrong. If the discount produces a better price than the cap, the investor gets the discount benefit.
Model both scenarios in this calculator to understand the full range of outcomes. The worst case for founders is often different from what they expect.
Multiple SAFEs interact in complex ways. With pre-money SAFEs, each SAFE dilutes founders without diluting other SAFE holders, creating compounding dilution. With post-money SAFEs, each new SAFE dilutes previous SAFE holders, which can create conflicts between early and late SAFE investors.
Model your complete SAFE stack in this calculator before each new raise. Understand how your current investors will be affected by additional SAFEs.
Series A investors typically require a specific option pool size (often 10-20%) calculated on a post-money basis but created pre-money, coming out of founder equity. This "option pool shuffle" adds dilution that many founders don't anticipate when modeling their SAFE conversions.
Include realistic option pool assumptions when modeling your post-Series A cap table. The option pool dilutes founders, SAFE holders, and existing option holders.
As companies grow, SAFE management can become chaotic. Side letters, modified terms, and verbal agreements create a tangle of obligations that can derail a Series A. Some companies discover at Series A that they have more SAFE dilution than they realized.
Maintain a clean SAFE register from day one. Use this calculator to verify your understanding of each SAFE's terms and conversion mechanics. Before a priced round, have your lawyer review all outstanding SAFEs.
YC's standard SAFE is founder-friendly in many respects, but investors sometimes modify it with additional terms: higher caps, guaranteed board seats, extensive information rights, or unusual conversion mechanics. Some founders accept these modifications without understanding the implications.
Any deviation from the standard YC SAFE should be reviewed carefully. Use this calculator to model non-standard conversion terms and understand their impact.
Many founders focus only on equity financing conversion without considering acquisitions. SAFE terms can significantly impact acquisition proceeds - some SAFEs have 1x preference in acquisitions, while others convert to common. Model acquisition scenarios to understand how SAFEs affect exit distributions.
The valuation cap is the primary negotiating point in most SAFE discussions. Founders want higher caps to minimize dilution; investors want lower caps to maximize returns. The right cap depends on: comparable transactions, company traction, investor value-add, and market conditions.
Research comparable SAFE raises in your space and stage. Use this calculator to model different caps and understand the ownership implications. Present data-backed arguments for your target cap rather than arbitrary numbers.
Consider raising smaller amounts at higher caps rather than larger amounts at lower caps. $500K at a $10M cap is better for founders than $1M at a $5M cap, even though the total raised is less. You can always raise more later at higher valuations.
Discount rates have become less common as valuation caps are now the primary pricing mechanism. However, discounts can serve specific purposes: (1) protecting investors when the priced round is below the cap, (2) providing additional upside for very early investors, or (3) simplifying negotiations when parties can't agree on a cap.
If an investor requests a discount in addition to a cap, model the scenarios in this calculator. In most cases, the cap will be the binding constraint, making the discount irrelevant. Consider whether the discount adds meaningful investor protection or is just an unnecessary extra term.
When raising from multiple investors, consistency in SAFE terms prevents future conflicts. All investors in the same round should generally receive the same cap and discount. If you offer better terms to one investor, MFN clauses may require extending those terms to earlier investors.
For sequential SAFE raises at different stages, use this calculator to model the cumulative dilution. Increasing caps for later SAFEs reflects your company's progress and rewards earlier investors for taking more risk.
Pro-rata rights are valuable to investors but can complicate your Series A. If all SAFE investors exercise pro-rata, the effective new capital from Series A investors decreases. Some founders negotiate: (1) minimum investment thresholds for pro-rata ($100K-$250K), (2) capped pro-rata as a percentage of the round, or (3) no pro-rata for smaller investors.
Consider your target Series A size and investor composition when negotiating pro-rata. Large institutional Series A investors may not want their ownership diluted by small pro-rata investments.
Some investors request side letters with additional terms: information rights, board observation seats, or enhanced protective provisions. Evaluate each request carefully - these rights can complicate future fundraising and corporate governance.
Standard information rights (quarterly financials, annual budget) are generally reasonable. More extensive rights (monthly financials, hiring decisions, strategic approval) may be excessive for SAFE investors. Establish precedents you're willing to maintain as you scale.
SAFE raises should align with your company's needs and market position. Don't raise on SAFEs just because money is available - each SAFE dilutes your ownership. Raise the minimum needed to hit your next milestone, preserving equity for future rounds at higher valuations.
The gap between SAFE raise and Series A affects conversion outcomes. If you raise at a $5M cap but don't close Series A for 18 months, you may have grown significantly beyond that valuation. Consider the timeline when negotiating caps.
Before your priced round, prepare for SAFE conversion by: (1) verifying all outstanding SAFE terms and amounts, (2) modeling conversion at your expected Series A valuation, (3) communicating with SAFE investors about expected ownership, and (4) addressing any unusual terms or side letters.
Series A investors will want to understand your SAFE stack during due diligence. Present a clear cap table model showing pre-money ownership and post-conversion ownership. Use this calculator to generate that model.
Y Combinator maintains the official SAFE templates at ycombinator.com/documents. These include post-money SAFEs with valuation cap, post-money SAFEs with MFN, and side letters for pro-rata rights. Always use the current version - YC updates templates periodically.
The YC SAFE Primer at ycombinator.com/library provides detailed explanation of SAFE mechanics from the creators. Required reading for anyone using SAFEs.
Use our Cap Table Calculator to model complete ownership scenarios including option pools, employee grants, and multiple financing rounds. For equity compensation analysis, try our Stock Option Value Calculator to understand employee equity economics.
If you're evaluating the tax implications of equity compensation, our 409A Valuation Calculator helps estimate fair market value for option pricing purposes.
While SAFEs are designed to be simple, they're still legal contracts with significant implications. Consider engaging a startup attorney to: review modified SAFE terms, prepare the SAFE signing process, and ensure proper cap table maintenance.
California companies should be aware of securities law requirements for SAFE issuance, including Regulation D exemptions and state blue sky filings. Your attorney can advise on compliance requirements.
Convertible notes remain an alternative to SAFEs, particularly in certain markets and industries. Key differences include: (1) Notes are debt with maturity dates and interest; SAFEs are equity instruments with no maturity. (2) Notes may have security interests; SAFEs typically don't. (3) Notes appear as liabilities on balance sheets; SAFEs don't.
Some investors prefer notes for the debt protection, especially in uncertain markets. Some founders prefer notes when they expect rapid appreciation, as interest accrual increases the conversion amount.
Valuation cap benchmarks vary by stage, sector, and market conditions. As of 2025, typical ranges include: Pre-seed (idea stage): $2M-$8M caps; Seed (product stage): $6M-$15M caps; Post-seed (traction stage): $12M-$30M caps. These ranges shift significantly based on market conditions and geography.
Discount rates, when used, typically range from 15-25%, with 20% being most common. Higher discounts (25%+) may indicate investor concerns about timeline to priced round.
This calculator provides education and modeling capabilities, but shouldn't replace professional advice for significant transactions. Consider consulting: a startup attorney for legal review and documentation, a startup-focused CPA for tax implications, and experienced founders or advisors for strategic guidance.
I offer consultations on startup equity structures, SAFE negotiations, and corporate formation for California companies. Schedule a meeting below to discuss your specific situation.
Comprehensive answers to common questions about SAFE notes, conversion mechanics, and cap table implications.
A SAFE (Simple Agreement for Future Equity) is an investment contract that allows investors to provide capital to startups in exchange for the right to receive equity in a future financing round. Created by Y Combinator in 2013, SAFEs have become the standard instrument for early-stage startup fundraising. Unlike convertible notes, SAFEs have no maturity date, no interest rate, and are not debt. When a qualifying financing event occurs (typically a priced equity round), the SAFE automatically converts to equity based on its terms (valuation cap and/or discount rate).
Post-money SAFEs calculate the valuation cap including the SAFE investment itself, while pre-money SAFEs calculate the cap based on the company's value before the investment. With a post-money SAFE, investors know exactly what percentage they'll own upon conversion. For example, $500K on a $5M post-money cap guarantees 10% ownership. With a pre-money SAFE, the ownership percentage depends on total capital raised. Post-money SAFEs are now the YC standard and provide more predictable dilution for both founders and investors.
SAFEs convert upon specific triggering events defined in the agreement. The most common is an Equity Financing, typically when the company raises a priced equity round above a specified threshold (usually $1M). SAFEs also convert upon a Liquidity Event (acquisition or IPO) or Dissolution. Unlike convertible notes, SAFEs have no maturity date, so they remain outstanding indefinitely until a conversion event occurs. If none of these events happens, the SAFE holder may never receive equity, though they retain their contractual rights.
In an acquisition (Liquidity Event), SAFEs typically convert to equity immediately before the transaction closes, then participate in the acquisition proceeds. The conversion uses the valuation cap (or discount if more favorable) compared to the acquisition price. Most standard SAFEs include a 1x preference, meaning SAFE holders receive back their investment amount before participating in remaining proceeds. Some SAFEs allow holders to choose between getting their money back or converting to common and participating fully. The specific terms depend on the SAFE language.
A valuation cap sets the maximum company valuation at which the SAFE will convert to equity. If the priced round valuation exceeds the cap, the SAFE holder converts at the cap, getting more shares than new investors. For example, with a $5M cap and $15M Series A valuation, the SAFE holder effectively converts at 1/3 the price per share. The cap rewards early investors for taking higher risk. If the Series A valuation is below the cap, the SAFE simply converts at the actual valuation (or discount, if applicable).
A discount rate gives SAFE investors a percentage reduction on the price per share paid by new investors. A 20% discount means SAFE holders pay 80% of the Series A price. When a SAFE has both a cap and discount, the investor gets whichever produces more shares. For example, if the cap produces a $2 price per share and the discount produces a $1.80 price, the investor converts at $1.80. Discounts ensure SAFE holders get some benefit even when the priced round is below or at the cap.
SAFE caps vary widely based on stage, sector, and market conditions. As of 2025, typical ranges are: Pre-seed (pre-revenue/pre-product) $2M-$8M, Seed (some traction) $6M-$15M, and Post-seed (significant growth) $12M-$30M. These benchmarks shift with market conditions - caps were higher in 2021 and lower in 2023. Geography matters too - Bay Area caps tend to be higher than other regions. The best approach is researching comparable recent transactions in your specific space.
Most SAFEs today use only a valuation cap, which provides clear pricing and predictable ownership. Adding a discount can protect investors if the priced round is unexpectedly low, but adds complexity. Cap-only SAFEs are simpler to explain and model. If you do include a discount, 20% is standard. Some very early investors request both to ensure upside in any scenario. Use this calculator to model different structures and understand the implications before deciding.
With post-money SAFEs, dilution is predictable: divide the investment by the cap. A $500K SAFE on a $5M post-money cap equals 10% dilution. With pre-money SAFEs, dilution depends on total capital raised and is less predictable. Multiple SAFEs compound dilution - if you have $2M in SAFEs on various caps averaging to $10M, expect roughly 20% dilution before Series A. Use this calculator to model your specific SAFE stack and understand cumulative dilution.
With pre-money SAFEs, each SAFE dilutes founders equally and doesn't dilute other SAFE holders - they all convert on the same pre-money capitalization. With post-money SAFEs, later SAFEs dilute earlier SAFE holders as well as founders. Each new post-money SAFE increases the total shares, reducing everyone's percentage. This is why post-money SAFEs encourage earlier investing and why some early investors include MFN clauses to protect against later, better-termed SAFEs.
The "option pool shuffle" occurs when Series A investors require a specified option pool (usually 10-20%) calculated on a post-money basis but created before their investment (pre-money). This pool comes out of founder and SAFE holder equity, not the new investor's stake. The shuffle can add 5-10% additional dilution on top of SAFE conversion. When modeling your cap table, include realistic option pool assumptions - 15% is common for Series A.
Many SAFEs include pro-rata rights, typically for investments above a threshold (commonly $100K-$250K). Pro-rata gives investors the right to invest in future rounds to maintain their ownership percentage. This isn't automatic - investors must sign a side letter and exercise the right when the round occurs. Pro-rata can significantly impact Series A dynamics if many SAFE investors participate. Some founders negotiate capped pro-rata or exclude smaller investors from pro-rata rights.
An MFN clause allows early SAFE investors to adopt more favorable terms if the company later issues SAFEs with better terms. If you raise at a $6M cap, then later raise at a $4M cap, MFN holders can elect to convert at the lower cap. This protects early investors from being disadvantaged by subsequent deals. MFN clauses are standard in YC SAFEs. As a founder, track your MFN obligations - they can significantly affect your cap table if triggered.
Key differences: (1) SAFEs are equity instruments; notes are debt. (2) SAFEs have no maturity date; notes typically mature in 18-24 months. (3) SAFEs have no interest; notes accrue interest (usually 4-8%) that increases conversion amount. (4) SAFEs don't appear as liabilities on balance sheets; notes do. (5) SAFEs don't require repayment; notes could trigger default if not converted or repaid. SAFEs are simpler and founder-friendlier, which is why they've become the standard. Notes remain popular in some regions and when investors want debt protection.
For a standard YC SAFE with no modifications, many founders execute without lawyers. The documents are well-established and widely understood. However, you should involve a lawyer if: (1) the investor wants modified terms, (2) you have multiple existing SAFEs with different terms, (3) you're unsure about securities law compliance, or (4) significant amounts are involved ($500K+). A quick lawyer review typically costs $500-$2,000 and can prevent expensive mistakes. For complex situations, legal guidance is worth the investment.
Maintain a SAFE register spreadsheet from day one with: investor name, investment amount, date, valuation cap, discount rate, post-money vs pre-money, pro-rata rights, MFN provisions, and any side letter terms. Update this register with each new SAFE. Before a priced round, have your lawyer verify the register against signed documents. Use this calculator to model conversion scenarios. Consider cap table management software like Carta or Pulley for more complex situations.
Raise enough to hit meaningful milestones that justify a priced round, but minimize dilution. Most successful seed-stage companies raise $500K-$2M on SAFEs before Series A. Raising more than 25-30% of your company on SAFEs before a priced round can make Series A difficult - new investors want meaningful ownership, and excessive SAFE dilution leaves less room for them. Use this calculator to model your post-conversion cap table and ensure you're leaving room for future financing.
Consider a priced round when: (1) you're raising $2M+ from institutional investors who prefer priced rounds, (2) you have clear market comparables that justify a specific valuation, (3) you want to clean up a complex SAFE stack, (4) you need governance structures (board seats, voting rights) that SAFEs don't provide, or (5) you want to set employee option prices with 409A certainty. Priced rounds cost more in legal fees ($15K-$50K) and take longer (4-8 weeks) but provide clarity that SAFEs don't.
The primary negotiating point is the valuation cap - research comparables and use this calculator to understand implications. Other considerations: (1) discount rate - consider whether it adds value or just complexity, (2) pro-rata rights - standard above $100K but negotiable, (3) MFN provisions - protect early investors but manageable, (4) information rights - keep minimal for SAFEs, (5) side letter terms - resist excessive governance rights. Most importantly, negotiate terms you can consistently offer to all investors in the round.
SAFEs can be cancelled by mutual agreement, typically requiring repayment of the investment amount plus any negotiated premium. Some SAFEs include redemption rights that allow the company to repurchase after a specified period. Buying back SAFEs can make sense if: your company has cash but hasn't done a priced round, the cap is now significantly below fair value, or you want to simplify your cap table. Consult a lawyer to ensure proper documentation and securities law compliance for any SAFE repurchase.
If your Series A valuation is below all SAFE caps, SAFEs convert at the actual round valuation (or with the discount applied, if more favorable to investors). SAFE holders get the same price per share as new Series A investors, plus any discount benefit. This is often called a "down round" conversion. In this scenario, SAFE holders aren't penalized - they simply convert at the actual company value. However, founders and previous shareholders experience more dilution than anticipated.
Need personalized guidance on SAFE negotiations, equity structures, or startup legal matters? I offer consultations for founders and investors on startup transactions.