How SAFEs convert: prices, share counts and the assumptions that matter

A worked conversion example, the difference between pre-money and post-money SAFEs, and why the signed agreement—not a shortcut formula—controls the outcome.

A SAFE is a contract for future equity. It is not an issued shareholding at the time of purchase, and a standard Y Combinator SAFE is not a loan with interest and a maturity date. Conversion and other outcomes depend on the signed document and the event that triggers it.

Find the actual terms before doing the math

Start with the purchase amount, the form of SAFE, any valuation cap or discount, and the agreement’s definitions of Equity Financing and Company Capitalization. A cap is a conversion-pricing mechanism, not necessarily the company’s current valuation.

YC publishes separate U.S. post-money forms for a cap without a discount, a discount without a cap, and an uncapped MFN form. Do not assume every SAFE has both a cap and a discount. A modified agreement may work differently.

A simplified cap-and-discount example

Suppose a negotiated SAFE has a $500,000 purchase amount, an $8 million valuation cap and a 20% discount. Assume its agreed capitalization denominator is exactly 10 million shares, and the next round price is $2 per share. For this example only, assume the contract uses whichever applicable price gives the investor more shares.

Cap price: $8,000,000 ÷ 10,000,000 = $0.80 per share.
Discount price: $2 × 80% = $1.60 per share.
Selected price: $0.80, because it is lower.
Conversion shares: $500,000 ÷ $0.80 = 625,000 shares.

If the company had 10 million shares immediately before that conversion and there were no other changes, the SAFE holder would own 625,000 ÷ 10,625,000, or approximately 5.88%. This is not the ownership after the new round: new investor shares, other converting instruments and any pool increase must also be included.

This example illustrates arithmetic, not a universal SAFE formula. It does not model YC post-money capitalization definitions, multiple interacting SAFEs, a pool top-up, pro rata participation or rounding provisions. Use the actual agreement for those calculations.

What “post-money” changes

YC’s post-money framework makes ownership sold through a capped SAFE easier to estimate before the next priced round. In a simple cap-based case, $500,000 at a $5 million post-money cap represents approximately 10% before the new money in the priced round. A lower round price or other contractual provisions can change the result.

That 10% is not a promise of 10% forever. The priced round and later issuances dilute ownership. Legacy pre-money SAFEs use different capitalization mechanics, so combining pre-money and post-money instruments requires more than adding purchase-amount-to-cap percentages.

What to check in your cap table

Keep each signed SAFE with its recorded terms.
Separate estimated conversion shares from issued shares.
Model the entire financing, including all instruments and the agreed option pool.
Have the final conversion calculation and resulting documents reviewed before updating the legal ledger.

Notorio’s estimates help compare scenarios; they do not amend the contract or issue equity automatically. Read how estimated shares and units work in Notorio.

Sources and further reading