# SAFE conversion and dilution, worked end to end

> Northwind's SAFE converting in a $2,000,000 Seed with a pool top-up, step by step, to a cap table that sums to 100.00%.

Source: https://lopifi.com/learn/safe-conversion-and-dilution-math
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**How does a SAFE convert in a priced round, and how much dilution will founders take?** Northwind's SAFE converting in a $2,000,000 Seed with a pool top-up, step by step, to a cap table that sums to 100.00%.

[Dilution](https://lopifi.com/md/glossary/dilution) is what happens to a percentage when the denominator grows. Northwind's founders still hold 4,000,000 shares each after the Seed — but the fully diluted total goes from 9,000,000 to 12,198,120. This lesson walks the Seed in the order its arithmetic has to happen.

1. **Convert the SAFE at its cap.** The post-money SAFE's price doesn't depend on the round: $5,000,000 ÷ 9,473,684 ≈ $0.527778. $250,000 buys 473,684 shares.
2. **Top up the pool.** The unissued pool after the round must be 10% of the post-money shares. Solving for it adds 284,812 shares, in the pre-money.
3. **Price the round.** $8,000,000 ÷ (9,000,000 + 473,684 + 284,812) ≈ $0.819798 a share. The SAFE's price is below it, so the SAFE converts at its cap, as assumed.
4. **Issue the new shares.** $2,000,000 at that price is 2,439,624 shares — 20.00% of the 12,198,120 after the round.
5. **Rebuild the cap table.** Every row's shares over the new total. The column sums to exactly 100.00%.

Northwind's Series Seed, October 1, 2027

| Holder | Shares before | Before | Shares after | After |
| --- | --- | --- | --- | --- |
| Founder A | 4,000,000 | 42.22% | 4,000,000 | 32.79% |
| Founder B | 4,000,000 | 42.22% | 4,000,000 | 32.79% |
| Options granted | 65,000 | 0.69% | 65,000 | 0.53% |
| Unissued pool | 935,000 | 9.87% | 1,219,812 | 10.00% |
| SAFE → Series Seed | 473,684 | 5.00% | 473,684 | 3.89% |
| Seed investors | — | — | 2,439,624 | 20.00% |
| Total | 9,473,684 | 100.00% | 12,198,120 | 100.00% |

Northwind fully diluted, before and after the Seed.

*[Figure: cap table]*

The Series Seed rides in: 2,439,624 new shares and a pool topped up by 284,812. Every other wedge narrows by the same factor.

> **Each founder: 44.44% with just the pool, 42.22% once the SAFE is counted, 32.79% after the Seed — the same 4,000,000 shares throughout.**

**Northwind — Who was diluted by what.** The SAFE investor bought 5.00% and holds 3.89% after the round: the post-money SAFE protects against other SAFEs and the old pool, not against the round it converts in. The Seed investors bought 20.00% and hold exactly that, because the pool was sized in the pre-money.

**Exercise — Build the cap table after the Series Seed.** Northwind's Series Seed: $2,000,000 of new money at a $8,000,000 pre-money, with the unissued pool topped up to 10% of the post-money and the $250,000 SAFE converting at its $5,000,000 post-money cap. The founders and the granted options are filled in. Enter the unissued pool after the round, the SAFE's conversion shares and the new investors' shares. The round price works out to $0.819798. Type it in the workbook at https://lopifi.com/playground.

In this lesson: the option pool shuffle, and the same money as a SAFE and as a note at conversion.

## Pages in this lesson

- [The option pool shuffle](https://lopifi.com/md/learn/safe-conversion-and-dilution-math/option-pool-shuffle) — 5 min. What is the option pool shuffle?
- [SAFE versus note at conversion](https://lopifi.com/md/learn/safe-conversion-and-dilution-math/safe-vs-convertible-note-conversion) — 4 min. Does a SAFE or a convertible note convert into more shares?

## Where this lesson's rules come from

- [Y Combinator, Post-Money SAFE (Valuation Cap, no Discount), §2](https://www.ycombinator.com/documents) — The Safe Price, and what Company Capitalization counts (reference)
- [Y Combinator, Post-Money SAFE User Guide](https://www.ycombinator.com/documents) — What “post-money” means: post the SAFEs and the old pool, not the round's new pool (reference)
- [Wikipedia, “Stock dilution”](https://en.wikipedia.org/wiki/Stock_dilution) — Dilution — background (reference)

## Read further

- https://lopifi.com/md/startups/how-to-account-for-safes
- https://lopifi.com/md/accounting/safe
- https://lopifi.com/md/accounting/option-pool
- https://lopifi.com/md/accounting/cap-table

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Lesson:** Lesson 4 of 10 — 10 min
- **Terms taught:** [Dilution](https://lopifi.com/md/glossary/dilution), [Option pool shuffle](https://lopifi.com/md/glossary/option-pool-shuffle), [Valuation cap](https://lopifi.com/md/glossary/valuation-cap), [Fully diluted](https://lopifi.com/md/glossary/fully-diluted), [SAFE](https://lopifi.com/md/glossary/safe)
- **Previous:** [Friends and family money, Cap table · Lesson 3](https://lopifi.com/md/learn/ways-to-raise-startup-capital/friends-and-family-round)
- **Next:** [The option pool shuffle](https://lopifi.com/md/learn/safe-conversion-and-dilution-math/option-pool-shuffle)
- **The course:** https://lopifi.com/md/learn