SAFE math deep dive

SAFE conversion at the priced round

Y Combinator's current SAFE is the post-money SAFE, introduced in 2018 and now standard across 92% of 2026 pre-seed rounds (Carta). It comes in three US forms: valuation cap only, discount only, uncapped with MFN. We cover all three, plus the conversion math that determines how many shares the SAFE investor gets when the priced round happens.

The three YC SAFE forms in 2026

cap only

Post-money SAFE — Valuation Cap Only

Valuation cap, no discount. Most common form in 2026 pre-seed (~92% per Carta).

When to use: Standard pre-seed and early-seed rounds when founder and investor agree on a likely upper bound for the priced round.

Investor converts at the lower of the cap or the priced-round price. The cap effectively becomes the maximum pre-money the investor will accept for conversion. Post-money SAFE (current YC default) means new investors and the option pool refresh dilute the founders, not the SAFE holders.

discount only

Post-money SAFE — Discount Only

Discount (typically 15-25%) off the priced-round price, no cap.

When to use: When the priced round is imminent and the cap discussion is more contentious than the discount.

Investor converts at the priced-round price × (1 - discount). The lack of cap means investor exposure scales with the priced round — at high valuations the investor loses upside.

uncapped mfn

Post-money SAFE — Uncapped, MFN

No cap, no discount, but Most Favored Nation clause grants the SAFE holder the best terms of any later-issued SAFE before the priced round.

When to use: Very early friend-and-family rounds or pre-pre-seed where pricing discussion is genuinely deferred.

Most generous to founders. The MFN clause protects investors against later SAFE rounds with better terms but offers no upside floor. Rarely used by professional VCs in 2026.

Conversion math

At the priced round, the SAFE converts at the lower ofthe cap-derived price-per-share or the discount-derived price-per-share. Why this matters: when the cap is binding (which it usually is when set sensibly), the SAFE investor effectively buys shares at a price below the priced-round price. That dilution comes out of the founders' shares, not the new investor's.

Worked example

Worked example: $1M SAFE with $10M cap, conversion at $15M pre-money priced round.

Conversion formula: SAFE converts at the LOWER of: cap-derived price-per-share or discount-derived price-per-share.

Why it matters: If cap is binding (which it usually is when set sensibly), the SAFE investor effectively buys shares at a price below the priced-round price. This is dilution that comes out of the founders' shares, not the new investor's.

Pro-Rata Side Letter

Separate Pro-Rata Side Letter giving SAFE investors pro-rata rights in future rounds. Not included by default in the YC SAFE itself. Some SAFE investors negotiate the side letter as a condition of investing; others don't. Worth tracking separately on the cap table.

Source

↗ https://www.ycombinator.com/documents · Feb 2023 (YC SAFE User Guide); base post-money SAFE introduced 2018 · verified 2026-06-03

Not legal advice. This page summarises publicly-available YC SAFE methodology. Specific terms vary by deal. Consult counsel before signing.