Model exactly how your SAFE notes convert to equity at a priced round. Understand cap vs discount scenarios, post-money vs pre-money SAFEs, and total dilution before you sign. Free, no signup required.
Pre-money valuation of the new priced round
New cash raised in the priced round
Founder shares before this round
Option pool created pre-money (option pool shuffle)
A SAFE (Simple Agreement for Future Equity) is an investment instrument created by Y Combinator in 2013. Investors provide cash today in exchange for the right to receive equity at a future priced round, typically at a discount or with a valuation cap. SAFEs do not have interest rates or maturity dates, unlike convertible notes.
A valuation cap sets the maximum valuation at which a SAFE converts to equity. If an investor puts in $500K on a $5M cap SAFE and the next round prices at $20M pre-money, the investor converts at the $5M cap (not $20M), receiving 4x more shares per dollar than the new round investors. The cap protects early investors from being diluted by high valuations.
A discount rate gives SAFE investors a percentage discount on the share price of the next priced round. A 20% discount means if the next round prices shares at $1.00, the SAFE investor pays $0.80 per share. The discount rewards early investors for the additional risk of investing before a formal priced round. Most SAFEs use either a cap, a discount, or both.
This is a critical distinction. A post-money SAFE (the current Y Combinator standard since 2018) fixes the investor ownership percentage at the time of investment. A $500K SAFE on a $5M post-money cap means the investor will own exactly 10% at conversion, regardless of how many other SAFEs are outstanding. Pre-money SAFEs can cause unexpected dilution because multiple SAFEs can stack.
SAFEs convert automatically at the next "equity financing" — typically a priced preferred stock round. The triggering event is usually defined in the SAFE agreement. Standard Y Combinator SAFEs also include provisions for conversion at an IPO, acquisition, or dissolution.