How a post-money SAFE actually converts into shares

Think of a SAFE like a coat-check ticket for shares. When you signed it, you promised an early investor a claim on part of your company; they hand the ticket back at your next priced round and collect real shares. The question every founder wants answered is simple: how big is that claim? This guide walks it through in plain steps, then shows the exact arithmetic.

The one line to remember: a post-money SAFE's ownership is fixed the day you sign it — principal ÷ post-money cap — measured on the cap table after all SAFEs convert but before the new round's money. ("Fully-diluted," which you'll see below, just means counting every share that could exist once options and convertibles are all cashed in — not only the shares issued today.) Everything else follows from that.

The rule, and why it's counter-intuitive

A pre-money SAFE (the old form) buys the investor a dollar amount that converts at a cap or discount, and the resulting percentage depends on how everything else shakes out. A post-money SAFE — YC's default since November 2018 — flips that. It buys a fixed percentage of the post-money cap table. The number is locked at signing:

The "post-money" in the name means the ownership is measured on the cap table that already includes every SAFE's converted shares (and the new option pool), but not yet the new investor's money. That is the subtle part: it is not a percentage of today's company, and it is not a percentage of the fully-priced round. It sits in between.

Worked example

Take the simplest possible stack so the arithmetic is easy to check by hand:

• Founders: 10,000,000 fully-diluted shares today.
• One SAFE: $1,000,000 principal, $10,000,000 post-money cap.
• Priced round: $4,000,000 of new money at a $16,000,000 pre-money valuation.

Step one — the SAFE's fixed ownership:

Step two — turn that 10% into a share count. The SAFE owns 10% of the cap table that consists of founders + SAFE shares (no pool here), so:

Step three — price the round. The negotiated $16M pre-money is spread across those 11,111,111 pre-money shares:

Step four — the final cap table. Total fully-diluted shares = 10,000,000 + 1,111,111 + 2,777,778 = 13,888,889.

Who absorbs the dilution

Notice founders dropped from 100% to 72%, and the SAFE from a notional 10% to 8%. When you add a second post-money SAFE, though, the story changes: its percentage adds to the first, and every point of it comes out of founders and the option pool — never out of the other SAFE. That additive property is the single most under-counted mechanic in a seed stack, and it is why "a couple of small SAFEs" can quietly cost a founder 12–16 points. We cover it in the stacked-SAFEs guide.

Reading your own cap — tight, typical, or generous?

You don't need a formula to place yourself. Pull the valuation cap off the first page of each signed SAFE (it's the "post-money valuation cap" line), take your lowest one, and compare it to the pre-money valuation you realistically expect your next priced round to close at:

• Tight — your cap sits well below your expected pre-money. Example: a $6M cap heading into an $18M+ pre-money round. Your SAFE converts cheaply, so it claims a bigger slice of the company.
• Typical — your cap is roughly in the neighbourhood of the round. Example: a $12M cap into that same $18M round.
• Generous — your cap is at or above where you expect to price. Example: an $18M+ cap into an $18M round. The SAFE converts near round price and takes the least.

The lower your cap relative to the round, the more of your company that SAFE converts into — which is exactly the "tight caps → biggest block" pattern in the self-qualify table on the home page. Don't know your expected pre-money yet? Use a range; the report models bear / base / bull so you don't have to pick one.