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YC
Y Combinator Cast
03/07/18
@ Y Combinator
Investors should model their SAFE conversions to understand the implications of multiple SAFEs with different valuations and discounts, as this can complicate ownership stakes.
Video
YC
Carolynn Levy and Kirsty Nathoo - Startup Investor School Day 1
@ Y Combinator
03/07/18
Related Takeaways
YC
Y Combinator Cast
03/07/18
@ Y Combinator
Investors should review the cap table and conversion calculations carefully when their SAFEs convert, as errors can occur and affect their ownership stake.
KN
Kirsty Nathoo
10/17/18
@ Y Combinator
Founders need to be aware that their ownership percentage can decrease significantly due to dilution from SAFEs and new equity rounds, so they should plan accordingly for future fundraising. The percentage of ownership for SAFE investors is based on the valuation cap in the SAFE, and if the priced round valuation is higher than the cap, they convert at the cap, receiving more shares for the same investment than Series A investors.
YC
Y Combinator Cast
03/07/18
@ Y Combinator
Investors should check their rights and the cap table during conversion to ensure their SAFEs are converted correctly and that they retain their pro-rata rights.
KN
Kirsty Nathoo
10/17/18
@ Y Combinator
The introduction of post-money SAFEs simplifies understanding dilution by clarifying how much of the company founders have sold to investors after all SAFEs have converted.
KN
Kirsty Nathoo
03/07/18
@ Y Combinator
The SAFE investor's shares are calculated based on the conversion price, which is determined by the valuation cap if it's lower than the priced round valuation.
KN
Kirsty Nathoo
10/17/18
@ Y Combinator
It's crucial for founders to understand their dilution when raising money through SAFEs or convertible notes, as they may end up owning significantly less of the company than expected after a priced round.
KN
Kirsty Nathoo
10/17/18
@ Y Combinator
When raising money on SAFEs, the investor's ownership is calculated by dividing their investment amount by the post-money valuation or valuation cap.
YC
Y Combinator Cast
03/07/18
@ Y Combinator
In a merger or acquisition, a SAFE investor converts their investment into shares of common stock based on the target valuation, allowing them to participate in the proceeds of the merger.
YC
Y Combinator Cast
03/07/18
@ Y Combinator
The SAFE (Simple Agreement for Future Equity) allows investors to convert their investment into equity at a later date, but the exact ownership percentage isn't known until the priced round occurs.