SAFE Conversion Math

A worked example of how a SAFE turns into shares at a priced round.

Also known as: SAFE conversion, SAFE math, how SAFEs convert

SAFE conversion turns early money into shares when the priced round sets a price. Work one example fully and the mechanics never confuse you again: a $100k SAFE with a $6M cap and 20% discount, converting at a Series A priced at $10M pre-money ($10/share for simplicity).

discount path:  $10 × (1 − 0.20) = $8.00/share → $100k ÷ $8 = 12,500 shares
cap path:       $6M cap → $6.00/share → $100k ÷ $6 = 16,666.67 shares
cap binds ($6 < $8) → investor takes 16,666.67 shares (~1.67% pre-new-money)

Steps in general: compute both candidate prices (discounted round price vs cap-implied price), take the lower (investor-favorable), divide principal (+ any rolled interest/MFN adjustments) by it. That share count joins the fully-diluted total the round prices on.

The classic mistakes:

Forgetting accrued extras. Convertible notes add interest; MFN clauses upgrade terms; multiple SAFEs stack. Convert the whole stack, not the headline SAFE.
Modeling on outstanding shares. Conversion math runs on fully-diluted capitalization (options, pool, all SAFEs). Outstanding-only math understates dilution systematically.
Rounding chaos. Fractional shares, alternating rounding conventions across documents. Define rounding once in the model and match counsel’s decimals.
Surprise at closing. Running conversion math for the first time in the round’s final week, when negotiating leverage is gone. Model from the first SAFE signed, updated per instrument.

Keep a live model from the first early check: every SAFE/note entered with cap, discount, MFN and maturity, converting in one view. At pricing, the conversation becomes confirmation, not discovery. See cap table for where the output lives.