# The SAFE

> Cash now, shares at the next priced round: the post-money SAFE, on Northwind's $250,000.

Source: https://lopifi.com/learn/ways-to-raise-startup-capital/safe
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is a SAFE and how does it work?** Cash now, shares at the next priced round: the post-money SAFE, on Northwind's $250,000.

A [SAFE](https://lopifi.com/md/glossary/safe) — simple agreement for future equity — is cash now for shares at the next [priced round](https://lopifi.com/md/glossary/priced-round). It has no interest and no maturity. Since 2018, YC's standard is the post-money SAFE, where the [cap](https://lopifi.com/md/glossary/valuation-cap) is stated as a [post-money valuation](https://lopifi.com/md/glossary/post-money-valuation) and the investor's ownership is simply investment ÷ cap.

> “The post-money SAFE has been the YC standard since 2018.”

— [Y Combinator, SAFE financing documents](https://www.ycombinator.com/documents), The post-money SAFE: cap only, discount only, or MFN

**Northwind — Northwind's SAFE.** On November 2, 2026 an investor wires $250,000 on a cap-only post-money SAFE at $5,000,000: 5.00% of Northwind just before the next priced round, whatever that round turns out to be. The finance track counts the same $250,000 as [Runway](https://lopifi.com/md/glossary/runway) in [how a raise changes runway](https://lopifi.com/md/learn/how-a-raise-changes-runway).

*[Figure: safe conversion]*

Northwind's SAFE at the Seed: $250,000 on a $5,000,000 post-money cap against a $0.819798 round. The cap's price is lower, so it issues more shares and wins.

If the company is sold before a priced round, the SAFE does not vanish. The investor takes the greater of its money back or what its shares would get as converted at the cap; the SAFE says it operates like standard non-participating preferred.

> “In a Liquidity Event or Dissolution Event, this Safe is intended to operate like standard non-participating Preferred Stock.”

— [Y Combinator, Post-Money SAFE (Valuation Cap, no Discount), §1(d)](https://www.ycombinator.com/documents), A sale before the round: the SAFE's money back, or its as-converted share

**SAFE**
- Pro: One short standard document
- Pro: Close with each investor as soon as they wire
- Pro: No interest, no maturity date
- Con: Dilution lands at the next round, on top of that round's own
- Con: Usually a liability on the balance sheet until it converts
- Con: A stack of SAFEs at different caps is easy to under-model
- Best for: Pre-seed and seed money from several investors, closed one at a time

In this lesson: the post-money SAFE's arithmetic, and the MFN and pro rata side letters.

## Pages in this page

- [Post-money SAFE math](https://lopifi.com/md/learn/ways-to-raise-startup-capital/safe/post-money-safe-math) — 6 min. How does a post-money SAFE convert into shares?
- [MFN and pro rata side letters](https://lopifi.com/md/learn/ways-to-raise-startup-capital/safe/mfn-and-pro-rata-side-letters) — 5 min. What is an MFN SAFE, and what is a pro rata side letter?

## Where this page's rules come from

- [Y Combinator, SAFE financing documents](https://www.ycombinator.com/documents) — The post-money SAFE: cap only, discount only, or MFN (reference)
- [Y Combinator, Post-Money SAFE (Valuation Cap, no Discount), §1(d)](https://www.ycombinator.com/documents) — A sale before the round: the SAFE's money back, or its as-converted share (reference)
- [Wikipedia, “Simple agreement for future equity”](https://en.wikipedia.org/wiki/Simple_agreement_for_future_equity) — The SAFE — background (reference)

## Read further

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

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Part of:** [Ways to raise: SAFEs, notes, priced rounds, debt and grants](https://lopifi.com/md/learn/ways-to-raise-startup-capital) — 6 min
- **Terms taught:** [SAFE](https://lopifi.com/md/glossary/safe), [Valuation cap](https://lopifi.com/md/glossary/valuation-cap), [Post-money valuation](https://lopifi.com/md/glossary/post-money-valuation)
- **Previous:** [Ways to raise: SAFEs, notes, priced rounds, debt and grants](https://lopifi.com/md/learn/ways-to-raise-startup-capital)
- **Next:** [Post-money SAFE math](https://lopifi.com/md/learn/ways-to-raise-startup-capital/safe/post-money-safe-math)
- **The course:** https://lopifi.com/md/learn