Many founders turn to the Pre-Money SAFE for their early rounds because it’s quick, simple, and doesn’t require setting a valuation upfront. But in my opinion, it lacks clarity, especially when it comes to understanding how ownership will look post-conversion.
At Nama Ventures, we’ve made a conscious decision not to use the Pre-Money SAFE in our deals. Instead, we prefer the Post-Money SAFE because it offers much more transparency and fairness for both founders and investors. In this article, I’ll explain why.
The Evolution of the SAFE
The SAFE, short for Simple Agreement for Future Equity, was introduced by Y Combinator in 2013 as a faster, simpler alternative to convertible notes. It quickly gained traction because it helped early-stage startups raise money without the legal complications or valuation debates that usually come with equity rounds.
Over time, the SAFE evolved into two versions: Pre-Money and Post-Money. While they might sound similar, the way each version affects ownership and transparency is significantly different.
Why the Post-Money SAFE Makes More Sense
The original SAFE (now called the Pre-Money SAFE) was helpful for early fundraising, but as more investors joined, things got messy. Founders and investors were left in the dark about how much equity each SAFE holder would actually end up with. That uncertainty only became clear at the next priced round, and by then, it was often too late.
To fix this, Y Combinator launched the Post-Money SAFE in 2018. This version gives both sides, especially investors, a clear picture of what ownership will look like after conversion. From the moment the agreement is signed, the investor knows exactly what percentage of the company they’ll get. That transparency makes it easier to plan future rounds and track dilution.
The Math Behind It
Here’s where the main difference lies:
With Pre-Money SAFE, the investor’s ownership is calculated based on the company’s valuation before the investment. The challenge is that once other SAFEs are added, it’s hard to know how everything will convert. The final ownership stakes stay fuzzy until a priced round happens.
With Post-Money SAFE, the investor’s percentage is fixed after their investment is included. That means they know from day one what their stake will be, and it won’t change based on what other investors do. It’s simple math: investment amount divided by post-money valuation equals ownership percentage.
This clarity helps founders build cleaner cap tables and avoid surprises. For investors, it’s about protecting their expected equity from unexpected dilution.
Why the Fully Diluted Cap Table Matters
One common mistake we see is founders looking at a cap table without factoring in all the company’s future obligations, like SAFEs, stock options, and convertible instruments. That’s why it’s essential to view the fully diluted cap table. It gives a realistic picture of what the ownership structure will look like after everything is accounted for.
This isn’t just an accounting detail. It affects negotiations, control, and the company’s ability to raise future rounds. A clean, transparent cap table builds trust and reduces friction between founders and investors.
Final Thoughts
SAFE agreements are powerful tools when used correctly. But the real value doesn’t come from the model itself, it comes from both parties understanding the implications.
Founders need to know how much dilution they’re taking on. Investors need confidence in what they’re getting. That’s why at Nama Ventures, we stick with the Post-Money SAFE. It’s clearer, more predictable, and ultimately helps build better long-term partnerships.
