SAFEs explained for founders

What a SAFE is

A SAFE (Simple Agreement for Future Equity) is a promise: the investor pays now and receives shares later, when a priced round happens. There is no interest, no maturity date, and no valuation negotiation today, which is why early rounds moved to SAFEs in the first place.

The two levers that matter are the valuation cap and the discount. The cap sets the maximum effective valuation at which the SAFE converts; the discount gives the SAFE holder a percentage off the round price. When both exist, the investor gets whichever is better for them.

Post-money versus pre-money

A post-money SAFE defines the investor's ownership immediately: invest $200k at a $4M post-money cap and you own at least 5% until the round. A pre-money SAFE leaves ownership uncertain until every other SAFE is known, because they dilute each other.

Post-money is now the default in most markets because everyone can answer the only question that matters: what does the table look like if the round happens tomorrow?

What happens at conversion

At the priced round, each SAFE converts into shares at the better of its cap price or discounted round price. Stacked SAFEs at different caps convert at different prices, which is exactly the math founders get wrong in spreadsheets.

Model the stack before you sign anything. The free SAFE calculator on this site does the arithmetic, and inside BildrX conversion is computed on the register itself.

Mistakes to avoid

Raising too much on SAFEs without modelling the combined dilution. Signing side letters that quietly amend terms and then forgetting them. Using a template from the wrong jurisdiction. All three surface at the priced round, at the worst possible negotiating moment.