With a post-money SAFE, an investor gives you money and effectively “locks in” the percentage of your company that they’ll own at the moment you convert their SAFE into shares. For example: Let’s say an investor gives you 1 million dollars on a post-money SAFE. The valuation cap on this SAFE is $10 million.

How do post-money SAFEs convert?

By “post-money,” we mean that safe holder ownership is measured after (post) all the safe money is accounted for – which is its own round now – but still before (pre) the new money in the priced round that converts and dilutes the safes (usually the Series A, but sometimes Series Seed).

Do post-money SAFEs dilute each other?

Because the new Post-Money Safe includes all converting securities when calculating the Safe price, this means that the Safe and other converting securities do not dilute each other; they only convert the previous equity holders (i.e. common stockholders i.e. founders).

What is the discount rate in a SAFE?

The discount rate is a term in a Convertible Note or SAFE that gives investors a reduced price to that paid by the Series A investors. Typical discounts range from 0% to 20%.

What is the difference between pre and post-money valuation?

Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Post-money valuation includes outside financing or the latest capital injection. It is important to know which is being referred to, as they are critical concepts in valuation.

What is a SAFE discount?

To complicate things a little bit, sometimes a SAFE will have a discount. Because the SAFE comes before any investor later on, the SAFE investor might want the SAFE to convert to equity at a discount to the later round of financing. Discounts typically range from 10–30%.

What is a SAFE conversion?

SAFE financings (it’s an acronym for “Simple Agreement for Future Equity”) were pioneered by the startup accelerator Y Combinator as a replacement for convertible notes. Whenever the company raises its next round of equity financing, the SAFE will convert into shares of the company’s stock.

What is a SAFE financing?

A simple agreement for future equity (SAFE) is an agreement between an investor and a company that provides rights to the investor for future equity in the company similar to a warrant, except without determining a specific price per share at the time of the initial investment.

When do you use a post money safe?

While safes are being used for these seed rounds, these rounds are really better considered as wholly separate financings, rather than “bridges” into later priced rounds. In 2018 we released the “post-money” safe.

What does it mean to have post money ownership?

What does post money mean in Y Combinator?

In 2018 we released the “post-money” safe. By “post-money,” we mean that safe holder ownership is measured after (post) all the safe money is accounted for – which is its own round now – but still before (pre) the new money in the priced round that converts and dilutes the safes (usually the Series A, but sometimes Series Seed).

What’s the difference between pre money and post money?

On the other hand, post-money refers to how much the company is worth after it receives the money and investments into it. Post-money valuation includes outside financing or the latest capital injection.