For early stage founders, few decisions matter more than how they structure fundraising. The SAFE (Simple Agreement for Future Equity) has become one of the most common tools. But there’s a subtle distinction that dramatically changes dilution and ownership: SAFE pre money vs SAFE post money.

Many founders underestimate how much of their company they are giving away because they don’t model the difference. Investors, meanwhile, want clarity on exactly what percentage they are buying. Choosing the wrong version can create tension, surprises, and even disputes during a priced round.

This guide breaks down everything founders need to know. You’ll learn:

• What SAFE pre money and SAFE post money mean in practice
  
  
• How they affect dilution and cap table clarity
  
  
• Numerical examples showing how $500K or $2M raised plays out differently
  
  
• A side by side cap table comparison
  
  
• A step by step framework for choosing the right structure
  
  
• The most common mistakes to avoid
  
  

By the end, founders will know how to model SAFEs, avoid painful surprises, and negotiate with confidence.

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What is a SAFE and Why Founders Use It

SAFE stands for Simple Agreement for Future Equity. Introduced by Y Combinator in 2013, it allows startups to raise money without immediately setting a valuation. Instead, investors provide cash now in exchange for equity later, typically when the company raises a priced round.

Why SAFEs Became Popular

• Speed and low cost: SAFEs are shorter and cheaper than convertible notes or priced rounds.
  
  
• Defers valuation discussions: Early startups often have too little traction to justify a firm valuation.
  
  
• Flexible terms: SAFEs can include a valuation cap, a discount, or both, aligning risk and upside for investors.
  
  

The simplicity is valuable. But whether the SAFE is pre money or post money changes how much equity investors ultimately get — and how much founders keep.

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SAFE Pre Money vs SAFE Post Money

The key difference lies in how the valuation cap is applied to the cap table.

SAFE Pre Money

• Original YC template from 2013.
  
  
• Valuation cap is calculated before including the SAFEs.
  
  
• Each SAFE investor calculates their percentage as if they are the only one.
  
  
• Dilution compounds when multiple SAFEs stack.
  
  

Impact: Founders often believe they gave away less equity than they actually did.

SAFE Post Money

• Introduced by YC in 2018.
  
  
• Valuation cap includes the SAFEs and option pool.
  
  
• Each investor’s percentage is locked upfront.
  
  
• Dilution falls mainly on founders.
  
  

Impact: Investors know exactly what they own, but founders absorb dilution earlier.

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Core Differences at a Glance

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Step by Step Guide to Understanding Impact

Step 1: Model Ownership

Scenario: Raise $500K at a $5M cap.

• Pre Money:
  $500K ÷ $5M = 10%.
  Each SAFE investor believes they own 10%, even if others also invest later.
  
  
• Post Money:
  Post money cap = $5M + $500K = $5.5M.
  $500K ÷ $5.5M = 9.09%.
  The investor’s percentage is locked.
  
  

Step 2: Aggregate SAFEs

Raising $2M total across multiple SAFEs at $5M cap:

• Pre Money
  
  • Investor A: $500K ÷ $5M = 10%
    
    
  • Investor B: $500K ÷ $5M = 10%
    
    
  • Investor C: $1M ÷ $5M = 20%
    
    
  • Aggregate: 40% “promised” but in reality overlapping percentages mean founders keep less than expected.
    
    
• Post Money
  
  • Investor A: $500K ÷ $5.5M = 9.09%
    
    
  • Investor B: $500K ÷ $5.5M = 9.09%
    
    
  • Investor C: $1M ÷ $6M = 16.67%
    
    
  • Aggregate: 34.85%, clear and predictable.
    
    

Step 3: Add the Option Pool

Most Series A investors require a 10–15% option pool before closing.

• Pre Money: Pool added after SAFEs convert, diluting founders unexpectedly.
  
  
• Post Money: Pool accounted for in the valuation cap, reducing surprises but cutting founder ownership earlier.
  
  

Step 4: Stress Test Scenarios

• Scenario A ($500K raised):
  
  
  
  • Pre money = 10% promised, may shrink later.
    
    
  • Post money = 9.09% fixed.
    
    
• Scenario B ($2M raised):
  
  
  
  • Pre money = 40% aggregate, misleading for founders.
    
    
  • Post money = ~35% total, clear and locked.
    
    
• Scenario C ($3M raised in tranches):
  
  
  
  • Pre money = messy overlapping dilution.
    
    
  • Post money = each tranche locks ownership cleanly.
    
    

Pro Tip: Founders should always model three scenarios — conservative, realistic, and aggressive — to see how dilution compounds.

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Visual Cap Table Example: Pre Money vs Post Money

Setup:

• Founders start with 100%.
  
  
• Company raises $2M SAFEs at $5M cap.
  
  
• Later raises Series A at $10M pre money with a 10% option pool.
  
  

Pre Money SAFE Outcome

Result: Founders are surprised by how low their ownership drops once everything converts.

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Post Money SAFE Outcome

Result: Investor stakes are fixed and predictable. Founders still dilute but avoid surprise erosion.

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Common Mistakes to Avoid

1. Stacking multiple pre money SAFEs without modeling dilution
   
   
   • Leads to unexpected loss of founder equity.
     
     
   • Solution: Always simulate aggregate outcomes.
     
     
2. Forgetting the option pool
   
   
   • Pool expansions eat into founder ownership.
     
     
   • Solution: Bake the pool into your model before signing SAFEs.
     
     
3. Choosing post money without considering long term fundraising
   
   
   • Dilution upfront can limit room for later rounds.
     
     
   • Solution: Balance transparency with strategy.
     
     

Checklist: Choosing Between SAFE Pre Money and SAFE Post Money

• Need exact investor percentages today? → Post money
  
  
• Want flexibility for multiple small rounds? → Pre money
  
  
• Stacking many SAFEs? → Post money is safer
  
  
• Planning a priced round soon? → Pre money may provide breathing room
  
  
• Modeled the option pool? → If not, do it first
  
  

Conclusion and Next Steps

The difference between SAFE pre money and SAFE post money defines how dilution unfolds and who bears the cost.

Key takeaways:

• Pre money SAFEs give flexibility but create uncertainty and risk of over dilution.
  
  
• Post money SAFEs give investors clarity but push dilution onto founders earlier.
  
  
• The option pool can change outcomes significantly.
  
  
• Founders must model scenarios, not just single transactions.
  
  

Getting this right avoids painful surprises at Series A.

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