Fundraising
How SAFE conversion works
A SAFE converts into shares at the next priced round, at whichever price is lower: the price implied by its valuation cap, or the round price reduced by its discount. The lower price means more shares for the holder. Everything else — how many SAFEs are outstanding, whether they are pre- or post-money, whether the pool is refreshed in the same round — determines how much of the company they take in total.
Prepared by Perseids · Published · Updated
The conversion arithmetic
- 1Round price = round pre-money valuation ÷ fully diluted shares before conversion.
- 2Discounted price = round price × (1 − discount).
- 3Cap price = valuation cap ÷ fully diluted shares before conversion.
- 4Conversion price = the lower of the discounted price and the cap price.
- 5SAFE shares = SAFE amount ÷ conversion price.
Worked example
A £500,000 SAFE has a £5m cap and a 20% discount. The round is priced at a £16m pre-money over 9,000,000 shares, so the round price is £1.778 and the discounted price £1.422. The cap price is £5m ÷ 9,000,000 = £0.556. The cap wins: the SAFE converts into about 900,000 shares — roughly 9.1% of the company before the new investor's shares are issued.
Pre-money vs post-money SAFEs
| Type | What is fixed | Who absorbs later SAFEs |
|---|---|---|
| Pre-money SAFE | The cap only | SAFE holders dilute each other |
| Post-money SAFE | The holder's percentage at conversion | Founders absorb every additional SAFE |
Pre-money SAFE
- What is fixed
- The cap only
- Who absorbs later SAFEs
- SAFE holders dilute each other
Post-money SAFE
- What is fixed
- The holder's percentage at conversion
- Who absorbs later SAFEs
- Founders absorb every additional SAFE
Post-money SAFEs are the more common modern form and the more expensive one for founders when several are issued. Three post-money SAFEs at 8% each are 24% of the company before a priced round happens at all.
Prepared by Perseids for general information. It is not legal, tax or investment advice — confirm your specific situation with your advisers.
Frequently asked questions
- Can both the cap and discount apply?
- No. A standard SAFE applies whichever produces the better outcome for the holder — the lower conversion price — not both together.
- What happens if there is no priced round?
- The SAFE sits outstanding until a conversion event defined in the document, typically a priced round, a liquidity event or dissolution. Terms vary; read the specific instrument.
- Do SAFEs accrue interest?
- SAFEs generally do not. Convertible notes usually do, and that interest converts into additional shares.
Put this into practice with Perseids.
Model SAFE conversion on your cap table