Pre-Money SAFE

This article describes the Pre Money SAFE document and how you can access it on Savvi.

A SAFE is an agreement between an investor and a startup company. It was invented in 2013 by Y-Combinator. You can view their template here. 

A Pre-Money SAFE means that, when a SAFE converts based on the valuation cap, it calculates the conversion price per share based on the Company Capitalization EXCLUDING shares issuable to convertibles (SAFE + convertible notes). So any shares issuable to convertible holders will not count towards Company Capitalization, and thus have no impact on the conversion price. In other words, the Valuation Cap calculates conversion price per share "pre-money" to the SAFEs. The practical effect of this is that each SAFE dilutes both the founders AND every other SAFE when the SAFE is setup with a "pre-money" valuation cap.  

In contrast to this, a "post-money" SAFE is setup so that each SAFE dilutes only the founders and does not impact the ownership received by any other SAFE (because the SAFE shares are included in the Company Capitalization, the value of the Founders' shares gets pushed down more and more by any additional SAFEs).

Because of this, the "pre-money" SAFE is seen as a more founder-friendly alternative of SAFE compared to the "post-money" SAFE. 

Access this document through the following workflows:

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