HACKER Q&A
📣 olhausler

How to correctly calculate the “old” pre-money SAFE


Why do all the online tools give me a different result? Assume a $40k SAFE with a $4MM cap and no discount. Shouldn't this convert to 1% pre for any equity financing with a pre-valuation above the cap, independent of the number of SAFEs?

Due to my understanding, in such financing the SAFE would convert to 1% and dilute common. Going from there, the VC investment is calculated, which dilutes both, common and SAFE-preferred.

https://handbook.clerky.com/fundraising/safes-and-others states "If someone invests $1 million through a safe with a $10 million valuation cap, the safe will never convert into a number of shares that represent less than 10% of the company prior to the preferred stock financing." To my understanding, the above SAFE would only convert to a higher percentage if the pre-valuation was lower than the cap.

When I plug the numbers into https://angelcalc.com/model?new I see 0.9901% for the SAFE. It seems the tool dilutes both, common and SAFE holders. When I enter a second similar SAFE, the pre-valuation goes down to 0.9804% for each of the SAFEs. Shouldn't the SAFEs be constant and not influence each other?

Now let's try https://safegenie.io/ and it gives me 1.23% for the SAFE for most numbers of shares (I used 10,000,000 in all tools). This is wild, and possibly wrong in face of clerky.com above.

Now I am using https://captable.io/ and it gives me 0.85% despite the form looks the same and seems to be from the same people as safegenie.io.

Are all 3 tools wrong? Any expert shed light, please?


  👤 rayshan Accepted Answer ✓
Hey Oliver, I'm building Captable.io at LTSE. No, pre-money safes do not convert at a fixed ownership. It depends on how many other convertible securities are converting at the round. The complex math is one of the reasons YC came up with the post-money safe. If you can share all your inputs here or email me at ray at ltse dot com, I'm happy to help.