SAFE note conversion math.

SAFE (Simple Agreement for Future Equity) is a startup investment instrument that converts to equity at the next priced round. Two key terms: valuation cap (max valuation for conversion) and discount (% off the round price). Investor gets the better of the two. Common structure pioneered by Y Combinator.

100,000 SAFE with 5M cap and 20% discount. Series A round at 8M valuation. Cap conversion: 100k / 5M = 2.0% ownership. Discount conversion: 100k / (8M × 80%) = 100k / 6.4M = 1.56%. Investor takes better deal: 2.0% via cap. Series A shares worth 160k. Return multiple: 1.6x at conversion. Future upside if startup continues growing.

SAFE benefits: simpler than convertible notes (no interest, no maturity), founder-friendly (no debt, faster closing), VC-friendly (clear conversion mechanics). Drawbacks: investor takes risk if no priced round happens (SAFEs sit indefinitely). Most startups raise priced round within 18-24 months of SAFE - those that don't often fail.

Run it with sensible defaults

Using investment amount of 100,000, valuation cap of 5,000,000, discount of 20%, qualified round valuation of 8,000,000, the calculation works out to 2.00%. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Investment Amount, Valuation Cap, Discount %, and Qualified Round Valuation — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Cap price = investment / cap. Discount price = investment / (round × (1 - discount)). Use lower (better for investor). Ownership = investment / conversion val × 100. The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Using this well

Treat the output as one point on a wider map. Run it three times — a pessimistic case, a central case, and a stretch case — and plan against the pessimistic one. That habit alone separates people who stick with an investment plan from those who bail at the first wobble.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.