Module 6 · Priced rounds and notes
A full Series A, step by step
Two founders, two post-money SAFEs, a pool top-up, and a $14M Series A. Solve the round from the first cap table to the last share.
In this lesson you will learn
- How post-money SAFEs convert through the Company Capitalization
- How to calculate the pool top-up and the price per share together
- How to build the final cap table and do a check of it
- Who pays for each part of the round
Northwind Labs signs a Series A term sheet: $14M at a $56M pre-money valuation. Today Ada and Ben own 87.5% of the company. After the round, they own exactly 50%. This lesson finds each share between those two numbers. When you can do this calculation by hand, no term sheet can surprise you.
Predict first
Ada and Ben own 87.5% today. Their two SAFEs convert into 20% of the company. Then the pool increases to 10% of the post-money, and the Series A buys 20%. What do Ada and Ben own after the round?
Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.
They own 50%. The SAFEs decrease their share from 87.5% to 70%. Then the pool top-up and the new money get 28.57% of the rest. Many founders calculate 87.5% × 80% × 80% = 56% and forget the pool top-up. The steps below show where each point goes.
The starting point
This is Northwind’s cap table today, before the SAFEs convert:
| Holder | Shares | Fully diluted |
|---|---|---|
| Ada (common) | 4,000,000 | 50.00% |
| Ben (common) | 3,000,000 | 37.50% |
| Options granted to employees | 800,000 | 10.00% |
| Unissued option pool | 200,000 | 2.50% |
| Total | 8,000,000 | 100% |
Northwind also signed two YC post-money SAFEs, each with a valuation cap and no discount:
- SAFE 1: $500,000 at a $5M post-money cap. It owns $500K ÷ $5M = 10%.
- SAFE 2: $2M at a $20M post-money cap. It owns $2M ÷ $20M = 10%.
The SAFEs sold 20% for $2.5M. Post-money SAFEs do not dilute each other, so each keeps 10% until the Series A. The post-money cap math lesson shows why.
The term sheet gives $14M at a $56M pre-money valuation, thus a $70M post-money valuation. The new investors get $14M ÷ $70M = 20%. The pre-money includes the SAFE shares and an unissued pool of 10% of the post-money fully diluted shares.
Why the math goes in a circle
Two parts of the calculation depend on each other:
- The Safe Price uses the Company Capitalization, and the Company Capitalization includes the SAFE shares.
- The price per share uses the pre-money shares, which include the pool top-up. The top-up uses the post-money shares, which come from the price.
Each circle has a short formula, and the worked example uses them. A spreadsheet can also guess a value and calculate again until the numbers do not change.
How does a spreadsheet find the answer?
Start with no pool top-up. Calculate the price, the post-money shares, and the pool that those shares need. Then use that pool and calculate again:
| Pass | Pool estimate | Price | Post-money shares |
|---|---|---|---|
| 0 | 0 | $5.6000 | 12,500,000 |
| 1 | 1,050,000 | $5.0679 | 13,812,500 |
| 2 | 1,181,250 | $5.0084 | 13,976,562 |
| 3 | 1,197,656 | $5.0010 | 13,997,070 |
| Final | 1,200,000 | $5.0000 | 14,000,000 |
Each pass multiplies the error in the pool estimate by 0.10 × 1.25 = 0.125. After 7 to 8 passes, the estimate is within 1 share of 1,200,000. The formula in step 3 of the worked example gives the same answer in one step.
The solution, step by step
Worked example · step 1 of 6
Northwind's Series A
- 1
Find the Company Capitalization
The YC post-money SAFE counts all shares, options, the old unissued pool, and all SAFEs. It does not count the new pool or the new money. Each SAFE owns amount ÷ cap of this count, so the SAFEs together own 20% of it.
SAFE total = 10% + 10% = 20% Company Capitalization (CC) = 8,000,000 ÷ (1 − 20%) = 10,000,000
These steps are not one firm’s method. The YC Post-Money Safe User Guide gives the same price formula: “Series A Price per Share = pre-money valuation / (total fully diluted shares post safe conversion + option pool increase)”. Step 3 is that formula, solved for the pool top-up. The NVCA model term sheet puts the pool in the pre-money in the same way.
The cap table after the round
| Holder | Security | Shares | Fully diluted | Value at $5.00 |
|---|---|---|---|---|
| Ada | Common | 4,000,000 | 28.571% | $20.0M |
| Ben | Common | 3,000,000 | 21.429% | $15.0M |
| Employee options | Options on common | 800,000 | 5.714% | $4.0M |
| SAFE 1 | Series A-1 Preferred | 1,000,000 | 7.143% | $5.0M |
| SAFE 2 | Series A-2 Preferred | 1,000,000 | 7.143% | $5.0M |
| Series A investors | Series A Preferred | 2,800,000 | 20.000% | $14.0M |
| Unissued pool | Reserved for options | 1,400,000 | 10.000% | $7.0M |
| Total | 14,000,000 | 100% | $70.0M |
Do these checks on each pro forma cap table that you get:
- The shares add up to the post-money total, and the percentages add up to 100%.
- Price × post-money shares = post-money valuation: 14,000,000 × $5.00 = $70M.
- The new investors own new money ÷ post-money: $14M ÷ $70M = 20%.
- The unissued pool is the target: 1,400,000 ÷ 14,000,000 = 10%.
Each SAFE converts into its own sub-series of preferred stock, here Series A-1 and Series A-2. These shares have the rights of the Series A, but their liquidation preference uses the Safe Price. Thus the preference of SAFE 1 is $500,000, not $5M. YC calls this Safe Preferred Stock.
Who paid for what
Follow each holder through the round:
- Ada and Ben: 87.5% today, 70% after the SAFEs convert, and 50% after the Series A.
- SAFE 1: 10% after it converts, and 7.143% at the end. The Series A money (20% of the post-money) and the pool top-up (1,200,000 ÷ 14,000,000 = 8.571%) diluted it: 10% × (1 − 20% − 8.571%) = 7.143%. Its $500,000 is worth $5.0M at the Series A price, 10 times the money on paper.
- SAFE 2: also 7.143% at the end. Its $2M is worth $5.0M, 2.5 times the money on paper.
- Series A investors: 20%, the same as the term sheet. The pool top-up did not dilute them, because it sits in the pre-money.
The effective pre-money valuation is $56M − (1,200,000 × $5.00) = $50M. That is the Company Capitalization at the round price: 10,000,000 × $5.00.
The builder starts with Northwind’s numbers. Step through the cap table with the buttons under the readouts. Then change the pool, the SAFEs, or the term sheet, and watch who pays.
Cap table builder
Build a Series A from today to the close
Set the company today, its SAFEs and notes, and the term sheet. Then look at the cap table at each step, and see who pays for each part.
The company today
SAFEs and notes
SAFE 1
TypeType 0 for no cap.
SAFE 2
TypeType 0 for no cap.
The term sheet
- Price per share
- $5.00
- $56M ÷ 11,200,000
- Effective pre-money
- $50M
- Headline: $56M
- Founders own
- 50%
- 87.5% today
The Series A investors pay $14M for 20% of a $70M company. Before their money comes in, the SAFEs and notes convert and the pool grows, and the new investors pay for neither. The founders go from 87.5% today to 50%.
Step 4 of 4, the new money comes in. The Series A investors buy 2,800,000 new shares at $5.00: $14M ÷ $70M = 20% of the company. The founders end at 50%.
- Founders
- Employees and pool
- SAFE and note holders
- Series A investors
| Holder | Security | Shares | Ownership |
|---|---|---|---|
| Ada | Common | 4,000,000 | 28.57% |
| Ben | Common | 3,000,000 | 21.43% |
| Employee options | Options | 800,000 | 5.71% |
| Option pool | Unissued options | 1,400,000 | 10% |
| SAFE 1 | Series A-1 preferred | 1,000,000 | 7.14% |
| SAFE 2 | Series A-2 preferred | 1,000,000 | 7.14% |
| Series A investors | Series A preferred | 2,800,000 | 20% |
| Total, fully diluted | 14,000,000 | 100% |
How each SAFE and note converts
| Holder | Converts | Price from | Price | Shares | Owns |
|---|---|---|---|---|---|
| SAFE 1Cap | $500K | Cap | $0.50 | 1,000,000 | 7.14% |
| SAFE 2Cap | $2M | Cap | $2.00 | 1,000,000 | 7.14% |
Now do the steps yourself. Each problem changes one input of Northwind’s round.
Work it out
Same round, but the term sheet sets a pool of 15% of the post-money. What is the price per share?
Post-money shares = 9,800,000 ÷ 0.65 = 15,076,923. Price = $70,000,000 ÷ 15,076,923 = $4.6429. The larger pool gets 2,061,538 new shares, and the price falls by 36 cents.
Work it out
With a pool of 20% of the post-money, what percentage do Ada and Ben own together after the round?
Post-money shares = 9,800,000 ÷ 0.60 = 16,333,333. Ada and Ben own 7,000,000 ÷ 16,333,333 = 42.86%, against 50% with a 10% pool.
Work it out
Go back to a 10% pool. This time, SAFE 2 has a $10M post-money cap, not $20M. What is the Company Capitalization?
The SAFEs own 10% + 20% = 30%. Company Capitalization = 8,000,000 ÷ (1 − 30%) = 11,428,571. SAFE 2 converts into 20% of that count, 2,285,714 shares, at a Safe Price of $10M ÷ 11,428,571 = $0.875.
What the pool size costs
The same deal with four pool targets shows the cost of each point of pool. The Series A investors own 20% in each row.
| Pool target | Pool top-up | Price | Ada and Ben | Their value | Each SAFE |
|---|---|---|---|---|---|
| 5% | 453,333 | $5.3571 | 53.571% | $37.5M | 7.653% |
| 10% | 1,200,000 | $5.0000 | 50.000% | $35.0M | 7.143% |
| 15% | 2,061,538 | $4.6429 | 46.429% | $32.5M | 6.633% |
| 20% | 3,066,667 | $4.2857 | 42.857% | $30.0M | 6.122% |
In this deal, each 5 points of pool cost Ada and Ben $2.5M of paper value. The option pool shuffle lesson shows how to negotiate the pool with a hiring plan.
When the round price is below a cap
Change the Series A to $5M at a $15M pre-money valuation, $20M post-money, with the same 10% pool. Now the round price is $1.2404. At its cap, SAFE 2’s Safe Price is $1.8726, which is more than the round price. The SAFE converts into the larger number of shares, so SAFE 2 converts at the round price.
At the round price, SAFE 2 buys like a new investor: $2M ÷ $20M = 10% of the post-money. SAFE 1 still converts at its cap, at $0.4681. These are the results:
| Holder | After the round |
|---|---|
| Ada and Ben | 43.41% |
| Employee options | 4.96% |
| SAFE 1 | 6.62% |
| SAFE 2 | 10.00% |
| Series A investors | 25.00% |
| Unissued pool | 10.00% |
SAFE 2 keeps 10%, not 7.14%. The YC guide warns about this result. Set the pre-money to $15M and the new money to $5M in the builder to see it.
Fully diluted: which count?
“Fully diluted” can mean different counts. Ada and Ben own a different percentage in each one:
| Count | What it includes | Ada and Ben |
|---|---|---|
| Issued and outstanding, as converted | Common stock and all preferred stock | 7.0M ÷ 11.8M = 59.32% |
| Outstanding plus granted options | The first count and the 800,000 options | 7.0M ÷ 12.6M = 55.56% |
| Fully diluted, as in a term sheet | The second count and the 1,400,000 unissued pool shares | 7.0M ÷ 14.0M = 50.00% |
Before a round, the term sheet count also includes the shares that the SAFEs and notes will become. For each percentage that you read, find out which count it uses.
Quiz · question 1 of 5
Test what you learned
Which share count is the "Company Capitalization" that sets the post-money Safe Price?
Key takeaways
- 1.Company Capitalization = shares before the SAFEs ÷ (1 − the SAFEs’ total percentage). Each SAFE gets its percentage of that count.
- 2.Post-money shares = (Company Capitalization − unissued pool) ÷ (pre-money ÷ post-money − pool target).
- 3.Price per share = post-money valuation ÷ post-money shares. It is the same as pre-money valuation ÷ pre-money shares.
- 4.The founders, the option holders, and the SAFE holders pay for the pool top-up. The new investors get their full percentage.
- 5.If the round price is below a SAFE’s Safe Price, the SAFE converts at the round price and gets more shares than its cap gives. The founders keep less than they planned.
Sources
- 1.Post-Money Safe User Guide. Y Combinator, Accessed 2026-11-04.
- 2.Post-Money Safe: Valuation Cap, no Discount. Y Combinator, Accessed 2026-11-04.
- 3.NVCA Model Term Sheet (2020). National Venture Capital Association, 2020.
- 4.Series A Funding: How to Raise Your First Priced Round. Carta, 2026-10-07.