Pre-money and post-money SAFEs
The first SAFE measured its cap before the SAFE money. Learn why YC changed it, and how the two kinds of SAFE split the dilution in different ways.
In this lesson you will learn
- Why a “$4M pre-money cap” and a “$4M post-money cap” are different prices
- How pre-money SAFEs dilute each other
- Who pays for the new option pool with each kind of SAFE
- Why YC moved to the post-money SAFE in 2018
Two angels each put $1M into Northwind on SAFEs “with a $4M cap.” With one word in the contract, each angel owns 25%. With a different word, each angel owns 16.67%. The word is “pre-money” or “post-money.” This lesson shows what changes, and why YC replaced the first kind.
The original SAFE
From 2013 to 2018, YC supplied the pre-money SAFE. Its cap did not include the SAFE money. The share count for its price also differed from the count of the post-money SAFE:
- It left out the other SAFEs and the convertible notes.
- It included the new option pool of the priced round.
That count caused three problems. SAFEs diluted each other. The founders paid for all of the new pool. And nobody could calculate the exact ownership before the company knew the terms of the priced round.
The same number is a different price
Make a guess before you read the math. This is the example from the start of the lesson.
Predict first
Northwind has 10,000,000 founder shares and no pool. Two angels each invest $1M on a SAFE with a $4M pre-money cap. What does each angel own after the SAFEs convert?
Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.
The pre-money SAFE price leaves out the other SAFE: $4M ÷ 10,000,000 = $0.40. Each angel gets $1M ÷ $0.40 = 2,500,000 shares. The total is 15,000,000 shares, so each angel owns 16.67%, and the founders keep 66.67%.
Now compare the two readings of the “$4M cap”:
Pre-money cap: Price = $4M ÷ 10,000,000 = $0.40
Each angel = 2,500,000 ÷ 15,000,000 = 16.67%
Founders = 10,000,000 ÷ 15,000,000 = 66.67%
Post-money cap: Each angel = $1M ÷ $4M = 25%
Founders = 100% − 25% − 25% = 50%
The pre-money reading puts the SAFE money on top of the cap. Thus, a pre-money cap is a higher price than a post-money cap with the same number. For a SAFE alone, the pre-money result is amount ÷ (cap + amount). One $1M SAFE at a $4M pre-money cap owns $1M ÷ $5M = 20%.
Pre-money SAFEs dilute each other
Look at the example again. Alone, each angel owns 20%. Together, each angel owns 16.67%. The price of each pre-money SAFE leaves out the other SAFE, so the second SAFE takes part of its shares from the first SAFE.
The post-money SAFE does the opposite. Each SAFE counts all the other SAFEs in its Company Capitalization, so each one keeps its percent. The lesson Post-money cap math shows that a new post-money SAFE comes out of the founders only.
Who pays for the new pool
The second difference is the new option pool of the priced round. The price of a pre-money SAFE includes that pool in its share count. Thus, the pool does not dilute the pre-money SAFE holders, and the founders pay for all of it.
Compare two $1M SAFEs. One has a $9M pre-money cap, and one has a $10M post-money cap. With no new pool, the two SAFEs pay the same price and each owns 10%. Then a Series A sells 20% and adds a pool of 10% after the round:
Post-money SAFE = 10% × (1 − 20% − 10%) = 7%
Pre-money SAFE = 10% × (1 − 20%) = 8%
The pool diluted the post-money SAFE but not the pre-money SAFE. The extra 1% came out of the founders.
The post-money SAFE changed this on purpose. The YC User Guide explains that without the change, the founders “bear all of the dilution for two rounds of hiring.” Now the SAFE holders share the dilution from the new pool of the priced round.
The YC User Guide shows the same effect in its second example. Investor A has $200,000 at a $3.8M pre-money cap. The simple estimate is $200K ÷ ($200K + $3.8M) = 5%. But the Series A adds 1,700,000 pool shares, and the price of the pre-money SAFE counts them. After conversion, A owns 5.22% of the company before the new money, not 5%.
Compare the two kinds of SAFE
The widget puts the same SAFEs through the same Series A, once as pre-money SAFEs and once as post-money SAFEs. By default, the pre-money cap is the post-money cap minus one SAFE, so a lone SAFE with no pool pays the same price either way. Change the number of SAFEs and the pool to see each effect alone.
Compare
The same SAFEs, pre-money and post-money
Each SAFE has the same amount. The two columns put the same SAFEs through the same Series A, once with pre-money caps and once with post-money caps.
The post-money cap minus one SAFE. A lone SAFE pays the same price either way.
| Item | Pre-money | Post-money |
|---|---|---|
| Cap of each SAFE | $9M pre | $10M post |
| What a lone SAFE buys at signature | 10% | 10% |
| Price each SAFE pays | $0.7625 | $0.80 |
| Each SAFE owns after the A | 7.27% | 7% |
| All SAFEs own after the A | 14.55% | 14% |
| Founders own after the A | 55.45% | 56% |
With pre-money SAFEs
- Founders
- Option pool
- SAFE 1
- SAFE 2
- Series A investors
With post-money SAFEs
- Founders
- Option pool
- SAFE 1
- SAFE 2
- Series A investors
The founders keep 0.55 more percentage points of the company with post-money SAFEs.
The SAFEs dilute each other. Each pre-money SAFE ends with 7.27%. Alone, it ends with 8%, because its price leaves out the other SAFEs. Each post-money SAFE ends with 7%, the same as a lone post-money SAFE.
With pre-money SAFEs, the founders pay for the new pool. The pre-money SAFE price counts the 10% pool that the Series A adds, so the pool does not dilute the pre-money SAFEs. With post-money SAFEs, the pool dilutes the SAFE holders too.
The widget opens with one of the scenarios below. The founders have 10,000,000 shares and no pool. The Series A raises $5M at a $20M pre-money valuation, with a new pool of 10% after the round. Each SAFE is $1M, at a $9M pre-money cap or at a $10M post-money cap.
| Scenario | Each SAFE after the Series A | Founders after the Series A |
|---|---|---|
| One pre-money SAFE | 8.00% | 62.00% |
| One post-money SAFE | 7.00% | 63.00% |
| Two pre-money SAFEs | 7.27% | 55.45% |
| Two post-money SAFEs | 7.00% | 56.00% |
The table shows two effects in opposite directions. Pre-money SAFEs dilute each other, and this helps the founders. But the new pool does not dilute pre-money SAFEs, and this costs the founders. Which effect is larger depends on the SAFE total and on the pool.
Thus, the post-money SAFE does not always give the founders more. A Crunchbase guest author called it “a less founder-favorable instrument.” The Carta SAFE calculator page tells users that post-money SAFEs are “more dilutive.” That statement is correct when the two caps have the same number. The sure advantage of the post-money SAFE is different: you know the percent on the day that you sign.
The same two SAFEs as shares
Here are Northwind’s two SAFEs from the lesson on post-money cap math, as pre-money SAFEs. Northwind did not raise a priced round yet, so no new pool exists.
Worked example · step 1 of 4
Northwind's two SAFEs with pre-money caps
- 1
Find the price of SAFE A
SAFE A is $500K at an $8M pre-money cap. The price divides the cap by the shares before the SAFEs, without the other SAFE.
Price = $8,000,000 ÷ 10,000,000 = $0.80 Shares = $500,000 ÷ $0.80 = 625,000
With pre-money caps, the founders keep 1.14 more percentage points here. But the comparison is not fair. Alone, an $8M pre-money cap is the same price as an $8.5M post-money cap. With the second SAFE, SAFE A gets the price of a post-money cap of approximately $8.9M.
Work it out
A company has 10,000,000 shares and no pool. It signs one pre-money SAFE: $500K at a $4.5M pre-money cap. What part of the company does the SAFE own after it converts?
Price = $4.5M ÷ 10,000,000 = $0.45. Shares = $500K ÷ $0.45 = 1,111,111. Percent = 1,111,111 ÷ 11,111,111 = 10%. That is $500K ÷ ($4.5M + $500K).
Work it out
The same company signs two of those SAFEs: each $500K at a $4.5M pre-money cap. What part does each SAFE own after they convert?
Each SAFE gets 1,111,111 shares. Total = 10,000,000 + 2 × 1,111,111 = 12,222,222. Each SAFE = 1,111,111 ÷ 12,222,222 = 9.09%, not 10%. The two SAFEs dilute each other.
Why YC changed to the post-money SAFE
YC released the post-money SAFE on 28 September 2018. The primary cause was certainty. With a post-money cap, the founders and the investor know the percent on the day that they sign. A new SAFE does not change it. The founders can keep an accurate running total. YC now writes: “Pre-money SAFEs are legacy and not recommended.”
Some pre-money SAFEs from before the change are still open, and some investors still use pre-money forms. A mix of the two kinds on one cap table is difficult to calculate. YC writes that such a mix “creates cap table uncertainty.” If you have few earlier SAFEs, YC recommends that you change to the newer type. If you have many, YC recommends the earlier type. Most convertible notes also use a pre-money cap. The lesson on convertible notes teaches them.
If you have old pre-money SAFEs
If your cap table has pre-money SAFEs, do these things before your priced round:
- List each SAFE with its kind of cap. Read the definition of the cap in each signed SAFE, not the summary in an email.
- Calculate the priced round with the terms of each signed SAFE. The lab in this module uses post-money SAFEs only. Your lawyer or your cap table software can do the pre-money math.
- Tell the new investors about the mix early. A mix changes the round price, so the new investors must see it before they set the price.
Quiz · question 1 of 5
Test what you learned
A lone $1M SAFE has a $4M cap and there is no pool. What does the investor own if the cap is pre-money, and if it is post-money?
Key takeaways
- 1.A pre-money cap does not include the SAFE money. Alone, a SAFE with a pre-money cap owns amount ÷ (cap + amount).
- 2.The price of a pre-money SAFE leaves out the other SAFEs, so pre-money SAFEs dilute each other.
- 3.The price of a pre-money SAFE includes the new pool of the priced round, so the founders pay for all of that pool.
- 4.The two effects push the founders’ result in opposite directions. The sure advantage of the post-money SAFE is that everyone knows the percent at signature.
- 5.In Q2 2026, 91% of SAFEs on Carta were post-money SAFEs. YC calls pre-money SAFEs “legacy.”
Sources
- 1.Post-Money Safe User Guide. Y Combinator, 2026-07-02.
- 2.SAFE vs. Convertible Note vs. Priced Round. Y Combinator, Accessed 2026-11-04.
- 3.Post-Money Safe Does Not Mean Founders Equity is Safe. Vela Wood, 2025-08-22.
- 4.The Startup Aspirin: SAFEs Ease Fundraising Pain, But Read The Fine Print First. Crunchbase News, 2025-05-29.
- 5.Series Seed Notes: Convertible Promissory Note and Term Sheet. Cooley LLP, Accessed 2026-11-04.
- 6.SAFE and convertible note calculator. Carta, 2026-04-29.
- 7.In the pre-seed market, valuation caps on new SAFEs keep getting bigger. Carta, 2026-08-25.