# SAFE versus note at conversion

> The same money and cap as a SAFE and as a note, converted at Northwind's Seed.

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

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**Does a SAFE or a convertible note convert into more shares?** The same money and cap as a SAFE and as a note, converted at Northwind's Seed.

The same $250,000, the same $5,000,000 cap, at the same Seed price — one as a post-money SAFE, one as a 6% note with a pre-money-style cap and a 20% discount.

|  | SAFE | Convertible note |
| --- | --- | --- |
| Amount converting | $250,000 | $263,708.33 |
| Interest | $0 | $13,708.33 |
| Cap applied to | 9,473,684 (Company Capitalization) | 9,000,000 (shares before the round) |
| Conversion price | $0.527778 | $0.555556 |
| Shares issued | 473,684 | 474,674 |

The note's figures hold the Seed's price fixed; in a real round the note's shares would move the price a little too.

Two effects pull in opposite directions. The note's interest converts too, adding shares. But its cap is divided by the shares before the round, without the note itself, which gives a higher price per share than the post-money SAFE's cap divided by a capitalization that already includes the SAFE. Here they nearly cancel; with a bigger note or a longer wait, the interest wins.

## Where this page'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)
- [ASC 470-20 — Debt with Conversion and Other Options](https://asc.fasb.org/470/tableOfContent) — A convertible note is debt until it converts (codification)

## Read further

- https://lopifi.com/md/accounting/safe
- https://lopifi.com/md/accounting/convertible-note

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Part of:** [SAFE conversion and dilution, worked end to end](https://lopifi.com/md/learn/safe-conversion-and-dilution-math) — 4 min
- **Terms taught:** [SAFE](https://lopifi.com/md/glossary/safe), [Convertible note](https://lopifi.com/md/glossary/convertible-note), [Valuation cap](https://lopifi.com/md/glossary/valuation-cap)
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