Post-money SAFE versus pre-money SAFE: what changes for the founders?
FundraisingEquity
The words describe what the cap measures. A post-money cap counts the SAFE money itself as part of the company's value, so an investor's share on conversion, measured just before the new money in that round comes in, is simply their investment divided by the cap: $500,000 at a $5 million post-money cap is 10 percent. A pre-money cap counts the company's value before the SAFE money goes in, so each investor's share depends on how many other SAFEs are sold, and nobody knows their number until the round closes.
Why the change matters to founders
Under the post-money form each SAFE holder's percentage is locked, which investors like. The dilution from every additional SAFE therefore lands on the founders and the existing stockholders, not on the earlier SAFE holders. Selling SAFEs one at a time over a year feels like small decisions; under a post-money cap they add up to one large one. Track the running total against the cap as you go.
Y Combinator switched its standard forms to post-money in 2018, and the post-money SAFE is what most investors now expect. The pre-money form still exists and some investors still use it, and the first page tells you which one you are holding: the post-money forms define a Post-Money Valuation Cap, the pre-money form defines a Valuation Cap. If the choice is yours, use the post-money form. If an investor hands you a pre-money one, work out the total you plan to raise on SAFEs before you sign, because under a pre-money cap your dilution is not settled until the round closes.
Arabella's library carries four SAFE forms: post-money cap only, post-money cap and discount, pre-money cap only, and pre-money cap and discount. Venture Math models a SAFE round at either kind of cap. It does not model discounts.
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Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.