Financial Planning
Pre-Money vs. Post-Money SAFEs: How to Compare Ownership
Identify what a SAFE cap includes and separate current equity, estimated conversion ownership and later new-money dilution.
What you will learn
- Identify SAFE cap basis
- Separate current records from conversion scenarios
- Prepare source-linked questions for counsel
Compare pre-money and post-money SAFEs by identifying the capitalization definition and the moment when ownership is measured. A post-money SAFE cap does not promise permanent ownership after a later equity round. Read the actual forms and model every outstanding instrument together.
This is a limited cap-based US-company exercise, not an interpretation of an individual agreement. Collect executed forms, purchase amounts, amendments, side letters and proposed financing assumptions, then take the worksheet to qualified securities counsel.
Name the instrument and measurement point
Record issuer, form/version, amount, cap type, discount or MFN features, and the exact capitalization definition. Do not classify a contract from a filename or email summary.
YC’s SAFE guidance states that its post-money cap is after SAFE money, but before new equity-financing money and a financing-related pool increase. Different or amended contracts can require different treatment.
Separate three views: issued equity today, estimated as-converted ownership before new money, and ownership after the priced financing. A SAFE is not already-issued stock.
Compare two constrained cases
Illustrative cases: Each company has no options, warrants, other convertibles, or side arrangements. A single $500,000 cap-only instrument is assumed to convert at its cap. These examples isolate denominators, not real-contract advice.
Ownership before later priced-round dilution
| Cap framing | Simplified calculation | Estimate |
|---|---|---|
| $5 million post-money cap | $500,000 ÷ $5,000,000 | 10% |
| $5 million pre-money cap, only this instrument | $500,000 ÷ ($5,000,000+$500,000) | About 9.09% |
The identical $5 million labels do not describe an identical economic framing. If new money then buys 20% of the post-round company, the illustrative 10% post-SAFE stake becomes 8%. Existing holders become 72%; the new investor owns 20%. No pool changes or other instruments are included.
Do not assign every pre-money instrument an independent fixed ownership fraction and add the fractions. The interactions are what the complete conversion model must solve.
Keep the phases visible
Completed phase map for the post-money illustration
| View | Existing equity | SAFE | New investor |
|---|---|---|---|
| Current record | Issued shares | Separate contract | None |
| Modeled before new money | 90% | 10% | 0% |
| Modeled after 20% new-money dilution | 72% | 8% | 20% |
The first row deliberately has no fabricated fully diluted percentages. It describes current records, not a future conversion presented as completed ownership. Specify which view an investor presentation uses.
Build a document-linked comparison
- Collect all signed agreements, not only the most recent.
- Transcribe each cap basis and economic term.
- Ask counsel to confirm capitalization inclusions and conversion methods.
- Label the measurement point for each percentage.
- Model new money and pool changes separately, then reconcile the combined result.
Instrument / executed version / date: [ ]
Jurisdiction / counsel: [ ]
Purchase amount / funded status: [ ]
Pre-money or post-money cap: [ ]
Discount / MFN / amendments: [ ]
Capitalization definition and locator: [ ]
Other instruments and side letters: [ ]
Applicable conversion assumptions: [ ]
Ownership measurement point: [ ]
Later priced-round and pool changes: [ ]
Unresolved interpretation / reviewer: [ ]Check the explanation before sharing
“The cap is today’s company value.” It is an instrument-specific conversion input, not an appraisal. “Post-money includes every future dollar.” Identify which financing the definition covers. “Amount divided by cap always works.” It is a limited cap-based estimate, not a universal formula for discount, MFN, amended, or lower-priced conversion cases.
- Every instrument has a source document and confirmed form.
- Each percentage states its basis and moment.
- Current stock is distinguished from outstanding contracts.
- The later financing is not hidden.
- Unresolved terms remain open for counsel.
Next, use the multiple-SAFE exercise or compare a SAFE with a convertible note.
Informational disclaimer
We are not lawyers. This article is for general education only and is not legal, tax, accounting or investment advice. Check with your attorney or accountant before acting on it.