Post-money SAFE math
The Safe Price, Company Capitalization and conversion shares, worked on Northwind's $250,000 SAFE.
YC's SAFE defines the Safe Price as the Post-Money Valuation Cap ÷ the Company Capitalization, and Company Capitalization counts, as converted, every share outstanding, every option and promised option, the unissued pool, and the converting securities — this SAFE included. It does not count a pool increase made in the round itself.
Step 1: Fully diluted shares before the SAFE
9,000,000: the founders' 8,000,000, the 65,000 options granted and the 935,000 unissued.
Step 2: The SAFE's ownership
$250,000 ÷ $5,000,000 = 5.00% of the company once the SAFE is counted.
Step 3: Company Capitalization
9,000,000 ÷ (1 − 5.00%) = 9,473,684 shares, rounded down: the SAFE's own shares are inside the total.
Step 4: The Safe Price
$5,000,000 ÷ 9,473,684 ≈ $0.527778 a share.
Step 5: Conversion shares
$250,000 ÷ the Safe Price = 473,684 shares of Series Seed preferred — exactly 5.00% of 9,473,684.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- Background reading — not an authority
- Y Combinator, Post-Money SAFE (Valuation Cap, no Discount), §2 (opens in a new tab)The Safe Price, and what Company Capitalization countsFree to read
- Y Combinator, Post-Money SAFE User Guide (opens in a new tab)What “post-money” means: post the SAFEs and the old pool, not the round's new poolFree to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Valuation capThe highest valuation a SAFE or note converts at. On YC's post-money SAFE the Safe Price is the cap ÷ Company Capitalization, and the holder takes whichever of that or the round price issues more shares
- Fully dilutedCounting every share that exists or could: issued stock, options granted, the unissued option pool and convertible securities as converted. The basis a SAFE's Company Capitalization, a priced round's price per share and most ownership percentages are quoted on
- SAFECash from an investor in exchange for a right to shares in a future priced round, usually at a valuation cap or a discount. Not debt and not yet stock; because a SAFE can require cash on a change of control, it is often classified as a liability under ASC 480 and remeasured at fair value — the terms decide
See also
- How to account for SAFEs on your balance sheetA SAFE is cash today and shares later. Why it usually sits with liabilities, how the cap and discount set conversion, and what to book at the priced round.
- SAFEA simple agreement for future equity. An investor pays now, and the SAFE converts into shares at your next priced round, usually at a valuation cap, a discount, or both. It carries no interest and no maturity date.