The Post-Money SAFE: Why YC Changed the Standard

If you're raising on SAFEs, you need to understand the difference between pre-money and post-money SAFEs. Since 2018, Y Combinator's standard SAFE has been post-money—and this change affects how much of your company you're actually selling.

The Pre-Money SAFE (Old Standard)

In the old pre-money SAFE, the valuation cap represented the company's value before the SAFE money came in. This created a problem: the more SAFEs you sold, the more dilution you—the founder—took.

Example:

• Pre-money cap: $8M
• SAFE 1: $500K
• SAFE 2: $500K
• SAFE 3: $500K

With a pre-money SAFE, all three investors convert based on the same $8M cap. When they convert, you might find you've given away more than you expected because each SAFE dilutes the others.

The Post-Money SAFE (Current Standard)

The post-money SAFE flips this. The valuation cap represents the company's value after including the SAFE money. This makes dilution predictable and transparent.

Same example with post-money SAFE:

• Post-money cap: $10M
• SAFE 1: $500K → investor gets exactly 5%
• SAFE 2: $500K → investor gets exactly 5%
• SAFE 3: $500K → investor gets exactly 5%

Total SAFE dilution: 15%. You know exactly what you're giving away.

Why YC Made the Change

The switch to post-money SAFEs solved several problems:

1. Clarity: Founders and investors both know exactly how much ownership the SAFE represents. $500K on a $10M post-money cap = 5%, always.

2. Fairness: SAFE investors don't dilute each other. The first $500K investor and the fifth $500K investor get the same ownership for the same money.

3. Simplicity: Cap table calculations become straightforward. No complex formulas needed.

The Catch: Founder Dilution

There's a reason some founders preferred the old pre-money SAFEs: with post-money SAFEs, you take all the dilution, not the SAFE investors.

In a pre-money SAFE, if you raised more SAFEs, all SAFE investors would dilute each other (and you). In a post-money SAFE, each SAFE investor's percentage is locked in—the dilution comes entirely from your slice.

This makes post-money SAFEs more expensive for founders if you're raising a lot of SAFE money. But it's more honest about the true cost.

How to Think About Post-Money Caps

When negotiating a post-money SAFE, your valuation cap should be higher than it would be for a pre-money SAFE—typically by the amount of money being raised.

Rough conversion:

• Pre-money cap: $8M, raising $2M on SAFEs
• Equivalent post-money cap: $10M

If an investor proposes a $8M post-money cap when you expected an $8M pre-money cap, you're getting a worse deal than you thought.

Pro-Rata and the Post-Money SAFE

Post-money SAFEs also clarify pro-rata rights. The SAFE can include a percentage entitlement for future rounds based on the investor's ownership percentage at conversion. This makes it clear what pro-rata rights the investor actually has.

The Bottom Line

Post-money SAFEs are now the standard for good reason:

• More transparent: Everyone knows exactly what they're getting
• Simpler math: Ownership % = investment / post-money cap
• Fairer to investors: Each SAFE investor gets what they paid for

But remember: post-money caps should be higher than pre-money caps to represent the same dilution. Don't let anyone confuse the two.

When in doubt, use our SAFE Generator to create market-standard post-money SAFEs with the right terms.