SAFE dilution explained: cap, discount and post-money math
How post- and pre-money SAFEs convert in a priced round, with a worked cap table example.
Before the first priced round, most startups raise with instruments that turn into equity later. In the US the standard is the SAFE. In Brazil it's the convertible loan (mútuo conversível), which accrues interest.
Two levers: cap and discount
- Valuation cap: the maximum valuation at which the money converts, even if the round prices higher. - Discount: a reduction on the round price (20% is common). The investor converts at whichever is cheaper for them.
Post-money vs. pre-money cap
With a post-money SAFE (YC's current standard) the math is direct: $1M at a $10M post-money cap buys 10% of the company before the round — and the founder absorbs the dilution from other SAFEs. With a pre-money cap, ownership depends on how much else was raised on convertibles.
The example
Founders with 9M shares, a $1M post-money SAFE at a $10M cap, and a $5M round at $20M pre-money. The SAFE becomes 1M shares, the round prices at $2 per share and, after the round, the SAFE holds 8%, new investors 20% and founders 72%.
Watch the option pool
Investors usually ask for a 10–15% option pool created before their money. That shuffle dilutes only existing holders — founders and SAFE holders — not the new investor.
The dilution calculator models post- and pre-money SAFEs, discounts, the pool top-up and the full cap table after the round. The signed agreement always prevails over the simulation.
Source: Lei Complementar 182/2021, art. 5º, §1º, IV; modelo de SAFE pós-money da Y Combinator.