SAFE Calculator - Model Your Simple Agreement for Future Equity
Calculate how SAFE notes convert to equity at your next priced round. Model dilution scenarios, understand cap table impact, and make informed decisions about your startup's financing.
TL;DR - Quick SAFE Summary
SAFEs convert to equity at your next priced round at whichever gives investors more shares:the valuation cap price or the discount rate price. Post-money SAFEs (YC standard) give investors a fixed ownership percentage, while pre-money SAFEs dilute based on total SAFE amount raised.
What are SAFE Notes?
A SAFE (Simple Agreement for Future Equity) is a financing instrument created by Y Combinator in 2013 that allows startups to raise capital without setting a current valuation. SAFEs are designed to be simpler and more founder-friendly than traditional convertible notes.
Key SAFE Statistics:
Unlike convertible notes, SAFEs have no interest rate, maturity date, or repayment requirement. They simply convert to equity when specific trigger events occur, typically during the next priced funding round.
How SAFE Conversion Works
SAFE conversion is triggered by specific events, most commonly a "Equity Financing"(priced round above a minimum threshold, usually $1M). When this happens, the SAFE converts to equity using predetermined terms.
Conversion Formula:
Conversion Price = MIN(Valuation Cap ÷ Company Shares, Discount × Round Price)
The SAFE converts at whichever price gives the investor more equity (lower price per share)
Step-by-Step Conversion Process:
- Trigger Event: Company raises a priced round (typically $1M+ threshold)
- Calculate Cap Price: Valuation Cap ÷ Pre-Money Shares Outstanding
- Calculate Discount Price: Round Price × (1 - Discount Rate)
- Choose Conversion Price: Lower of cap price, discount price, or round price
- Issue Shares: SAFE Investment Amount ÷ Conversion Price
- Update Cap Table: Add new shares and recalculate ownership percentages
Example Conversion Scenario:
SAFE Terms: $500K investment, $5M cap, 20% discount
Next Round: $2M at $8M pre-money ($1.00 per share)
Cap Price: $5M ÷ 8M shares = $0.625 per share
Discount Price: $1.00 × 0.8 = $0.80 per share
Conversion: $500K ÷ $0.625 = 800,000 shares (8.9% ownership)
Post-Money vs Pre-Money SAFEs
In 2018, Y Combinator updated their standard SAFE to be "post-money" instead of "pre-money" to provide more certainty around ownership percentages.
Post-Money SAFEs (Current Standard)
- Ownership = Investment Amount ÷ Post-Money Valuation Cap
- Provides certainty to investors about minimum ownership
- Each SAFE dilutes existing shareholders but not other SAFEs
- More predictable cap table modeling
Pre-Money SAFEs (Legacy)
- Ownership calculated before including SAFE amounts
- Final ownership depends on total SAFE amount raised
- Can result in unexpected dilution for founders
- Less commonly used since 2018
Expert Insight: Why Post-Money Became Standard
"The shift to post-money SAFEs solved a major problem: stacking risk. With pre-money SAFEs, if you raised $2M across multiple SAFEs with $8M caps, each investor expected ~25% ownership, but collectively they'd own much more. Post-money SAFEs eliminate this uncertainty."
- Carolynn Levy, Partner at Y Combinator
When to Use SAFE vs Other Instruments
Use SAFEs When:
- • You need to raise capital quickly
- • Valuation is difficult to determine
- • You want minimal legal complexity
- • Raising smaller amounts ($10K-$2M)
- • Working with angel investors
- • Pre-product or early traction stage
Use Convertible Notes When:
- • You need a specific amount by a deadline
- • Investors want more protection terms
- • You want interest to accrue over time
- • Raising larger amounts ($500K-$5M)
- • Working with institutional investors
- • Bridge funding between priced rounds
Use Priced Equity When:
- • You have clear valuation metrics
- • Raising significant amounts ($1M+)
- • Investors want board seats
- • You need voting control certainty
- • Series A or later stage
- • Clear revenue/traction metrics
Market Data: Instrument Usage by Stage
• 71% SAFEs
• 18% Convertible Notes
• 11% Priced Equity
• 52% SAFEs
• 31% Convertible Notes
• 17% Priced Equity
• 8% SAFEs
• 15% Convertible Notes
• 77% Priced Equity
Common SAFE Terms Explained
Valuation Cap
The maximum valuation at which your SAFE converts to equity. If your next round values the company higher than the cap, SAFE investors get extra equity as a reward for early risk.
Discount Rate
A percentage discount on the per-share price in the next round. Rewards early investors with a lower price per share compared to new investors.
Most Favored Nation (MFN)
Ensures that if you offer better terms to future SAFE investors, earlier investors automatically get the same improved terms.
Pro Rata Rights
The right to invest in future rounds to maintain ownership percentage. Usually only applies to investments above a certain threshold.
How to Use the SAFE Calculator
Step-by-Step Guide:
- Set Your Pre-Round Cap Table: Enter current founder ownership and option pool percentage. This represents your company before any SAFE conversions.
- Model Your Next Priced Round: Input the pre-money valuation and investment amount for your expected Series A or next institutional round.
- Add Your SAFEs: For each SAFE, enter the investment amount, valuation cap, and discount percentage. Add multiple SAFEs if you have several investors.
- Analyze Results: Review the post-conversion cap table to understand how each SAFE converts and impacts your ownership structure.
- Model Scenarios: Try different round valuations to see how SAFE conversions change based on your next round's terms.
Pro Tip: Model multiple scenarios with different round valuations. If your round comes in below the SAFE caps, all SAFEs convert at the round price. If above the caps, they convert at the more favorable capped price.
Expert Insights on SAFE Strategy
"The biggest mistake I see founders make is raising too many SAFEs without considering cumulative dilution. Each SAFE might seem small, but they stack up. I recommend capping total SAFE raises at 15-25% of your company."
"SAFEs work best when you can reasonably expect to raise a priced round within 18-24 months. If you can't see a path to Series A, consider if you're ready for institutional funding."
"The cap should reflect what you think the company will be worth in 12-18 months, not today. It's better to set a slightly higher cap than to give away too much equity early."
SAFE Market Statistics & Trends
Usage Statistics
- • 89% of Y Combinator companies have used SAFEs
- • $47B+ total raised via SAFEs since 2013
- • 67% of pre-seed rounds now use SAFEs vs equity
- • Average SAFE size: $284K in 2023 (up from $156K in 2020)
- • Median conversion time: 14 months from SAFE to Series A
Term Benchmarks
- • Median valuation cap: $6M (pre-seed), $12M (seed)
- • Most common discount: 20% (used in 73% of SAFEs)
- • Pro rata threshold: $25K minimum (68% of SAFEs)
- • MFN inclusion: 84% of SAFEs include MFN clauses
- • Average SAFEs per company: 3.2 before Series A
Related Financial Calculators
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409A Valuation Calculator
Estimate 409A valuations for employee stock options and calculate strike prices.
Option Pool Calculator
Calculate option pool dilution and optimal sizing for employee equity programs.
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Track burn rate, calculate runway, and plan your fundraising timeline.
Find Investors
Discover investors that match your startup's sector, stage, and funding needs.
SAFE Calculator
Pre-Round Cap Table
This is your company's ownership structure before the next financing round and before any SAFE conversions.
Next Priced Round
These values determine how your SAFEs will convert. The pre-money valuation affects the price per share, which determines the conversion price for your SAFEs.
SAFEs
SAFEs convert at the lower of: (1) the valuation cap, (2) the discount price, or (3) the round price. The conversion price determines how many shares each SAFE receives.
Results
Post-Conversion Cap Table
| Stakeholder | Ownership % |
|---|---|
| Founders | 67.33% |
| Option Pool | 11.88% |
| SAFE $0.5M | 4.95% |
| New Investor | 15.84% |
| Total | 100.00% |
This calculator is provided for informational purposes only and should not be considered legal or financial advice.
Always consult with your legal and financial advisors before making investment decisions.
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Frequently Asked Questions
What is a SAFE note and how does it work?
A SAFE (Simple Agreement for Future Equity) is a financing instrument created by Y Combinator that allows startups to raise capital without setting a valuation. SAFEs convert to equity during the next priced funding round at either the valuation cap or discount rate - whichever gives investors more equity. Unlike convertible notes, SAFEs don't have interest rates, maturity dates, or repayment obligations.
What's the difference between pre-money and post-money SAFEs?
Post-money SAFEs (YC's standard since 2018) calculate the investor's ownership percentage by dividing their investment by the post-money valuation cap. This gives investors certainty about their minimum ownership. Pre-money SAFEs calculate ownership before including the SAFE amount, meaning the actual ownership depends on how much money the company raises in SAFEs.
How do valuation caps work in SAFE notes?
A valuation cap sets the maximum valuation at which your SAFE converts to equity. If your next round values the company above the cap, SAFE holders convert at the cap price, getting more equity. For example, with a $5M cap, if you raise at a $10M pre-money, SAFE investors get twice as many shares as the new investors per dollar invested.
What is a discount rate in SAFE notes?
The discount rate gives SAFE investors a percentage discount on the price per share in the next round. A 20% discount means if new investors pay $1.00 per share, SAFE holders pay $0.80. SAFEs typically convert at whichever is better for the investor: the capped price or the discounted price.
When should I use a SAFE vs convertible note?
Use SAFEs when you want simplicity and speed - they're shorter documents with fewer terms to negotiate. Choose convertible notes when you need to raise a specific amount with a deadline, want interest accrual, or need more investor protection terms. SAFEs are better for smaller, frequent raises while convertible notes work well for larger, structured rounds.
How do SAFEs affect founder dilution?
SAFEs dilute founders when they convert in a priced round. The dilution depends on the conversion terms - lower caps and higher discounts mean more dilution. Post-money SAFEs provide more predictable dilution since the ownership percentage is fixed. Multiple SAFEs stack up, so each additional SAFE increases total founder dilution.
Can I have multiple SAFEs with different terms?
Yes, you can issue multiple SAFEs with different caps, discounts, or other terms. Each SAFE converts independently based on its own terms. This is common when raising from different investors over time or offering different terms based on check size or strategic value.
What happens if I never raise a priced round?
If you never raise a priced round, SAFEs typically remain outstanding indefinitely or convert in specific scenarios like acquisition, IPO, or dissolution. Some SAFEs include pro rata rights or shadow voting rights even before conversion. Always review the specific terms as they can vary.
How do I calculate the impact of SAFEs on my cap table?
Calculate by determining the conversion price (lower of cap or discount), then dividing the investment amount by that price to get shares issued. Add these shares to your total to calculate new ownership percentages. Our calculator above models this automatically for multiple scenarios.
Are there any downsides to using SAFEs?
SAFEs can create uncertainty around ownership since conversion depends on future events. Multiple SAFEs can stack up and cause more dilution than expected. They also provide less investor protection than traditional equity, which might make it harder to attract institutional investors later.