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SAFE dilution calculator

The short answer

Stack your SAFEs, add the priced round and the option pool, and see exactly what founder ownership becomes. It runs the same round model Capable runs for customers, and one work email shows your results and sends you the model.
  • Post-money and pre-money caps, discounts, and the better of the two
  • The pool top-up priced where investors actually ask for it
  • Every step shown, so you can check the arithmetic
Use the calculatorGet the cap table template

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Your numbers

Change anything and the answer moves. The example is a typical seed: two founders, an accelerator SAFE, an angel SAFE and a $5M round.

Today

SAFEs already signed

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The priced round

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The pool top-up is created in the pre-money, which is the standard ask and the reason founders pay for it.

How the arithmetic works

Four steps, in the order a financing actually happens.

1. Count what exists. Founder shares plus the unissued option pool give the fully diluted count before the round. SAFEs are not shares yet, so they are not in this number.

2. Convert the SAFEs. A post-money SAFE takes its amount divided by its cap, measured on a capitalization that includes the other converting SAFEs but not the new money or the pool increase. A pre-money SAFE gets a price instead: its cap divided by the pre-money fully diluted count. Where a discount beats the cap, the discount wins.

3. Top up the pool. The investor asks for a percentage available after closing. Those shares are created before the money arrives, so the existing holders pay for them.

4. Price the round. The price per share is the pre-money valuation divided by the fully diluted count once the SAFEs have converted and the pool has been topped up. The new money buys shares at that price.

A post-money SAFE fixes the investor’s percentage, so every later SAFE dilutes the founders rather than the investor. Three stacked SAFEs at different caps all come out of the same place: your ownership.

What founders get wrong

The mistakes that turn a term sheet number into a different closing number.

Treating a post-money SAFE like the old pre-money one

The pre-money SAFE shared dilution with the other SAFEs. The post-money SAFE does not. Using the old mental model understates dilution by points, not decimals.

Forgetting the pool comes out of the pre-money

A 10% pool created before closing costs the existing holders about a tenth of the company. It is the single largest line founders leave out.

Counting the round before the conversions

SAFEs convert first. Pricing the round on today's share count gives a price that is too high and a founder percentage that is too optimistic.

Ignoring the MFN clause

A most-favoured-nation SAFE takes the best terms you later grant. Model the best cap you have given, not the one on that particular document.

This is a calculator, not a cap table

What changes when the same numbers live in a system.

The inputs stay current

A cap table updates when a grant is signed, an employee leaves or a SAFE is issued. A spreadsheet updates when somebody remembers.

The model uses real securities

Inside Capable the same round model reads your actual SAFEs, notes, classes and pool, with their real terms, so there is nothing to retype and nothing to mistype.

Everyone sees the same number

Employees and investors get a portal with their own holdings, which ends the quarterly round of equity questions by email.

SAFE dilution questions

How does a post-money SAFE convert?+

A post-money SAFE converts into a percentage equal to its purchase amount divided by its post-money valuation cap, measured on a capitalization that includes every converting SAFE but excludes the round's new money and any pool increase. A $125,000 SAFE on a $1.75M cap takes 7.14% before the round, and is then diluted by the new money and the pool top-up like everyone else.

What is the difference between a pre-money and a post-money SAFE?+

A pre-money SAFE's price comes from the cap divided by the pre-money fully diluted share count, so other SAFEs converting at the same time dilute it. A post-money SAFE fixes the investor's percentage instead, so the other SAFEs dilute the founders rather than the investor. Post-money is the current Y Combinator standard and is the less founder-friendly of the two.

Does the discount or the cap apply?+

Whichever gives the investor more shares. The calculator applies the cap price and the discounted round price and takes the better of the two, which is what standard SAFE documents require.

Why does the option pool make my ownership fall further?+

Because an investor asking for a pool available after closing almost always has it created in the pre-money. The new shares come out of the existing holders, so the pool top-up dilutes founders and earlier investors and not the incoming money. Set the pool to zero to see the difference.

Is this the same math Capable uses?+

Yes. The page runs the same round model the product runs for customers, so a scenario here and a scenario inside Capable give the same answer. The difference is that inside Capable it reads your real cap table instead of numbers you typed.

Keep reading

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