Explainer
How SAFE dilution actually works
A SAFE (Simple Agreement for Future Equity) dilutes you at the moment you sign it, not at the moment it converts, because the standard post-money SAFE fixes the fraction of the company it will own: the amount invested divided by the valuation cap. Take $500,000 on an $8,000,000 post-money cap and you have committed 6.25 percent of your company, whatever your cap table says today.
Published August 25, 2026
The one formula that matters
Ownership committed equals amount divided by cap. That is the defining property of the post-money SAFE, the standard form published by Y Combinator and used in most US early-stage financings since 2018. A $500,000 SAFE at an $8,000,000 post-money cap commits $500,000 / $8,000,000 = 6.25 percent, measured against the company as it stands after every SAFE converts but before the new round's money comes in.
This is the practical difference from the older pre-money SAFE, where the fraction depended on how many other SAFEs ended up converting alongside it. With post-money SAFEs the cost of each one is fixed when you sign, which means stacking them has a running total: the sum of amount divided by cap across every SAFE you have signed.
Nothing moves on signing day, and that misleads people
Sign a SAFE and your cap table looks unchanged: no new shares are issued, and your recorded ownership stays where it was. The dilution is real but latent. It lands at your next priced round, when the SAFE converts to shares at the cap price alongside the new investment.
The figure below runs that whole sequence through the dilution simulator this product ships. Read the middle row: the SAFE row is flat. Then read the last one.
| Event | Founder owns |
|---|---|
| Founding | 100.0% |
| SAFE signed: SAFE | 100.0% |
| Priced round: Seed | 75.0% |
Where the 25 points went
The founder ends at 75.0 percent, having lost 25 points in one round. Two things happened at once. The SAFE converted into its committed 6.25 percent, taking the founder to 93.75 percent of the pre-money capitalization. Then the seed investment, $2,000,000 on a $10,000,000 post-money valuation, bought 20 percent of the company and diluted everyone, founder and SAFE holder alike, by one fifth: 93.75 percent times 0.8 is 75.0 percent.
Every one of these figures is computed by the same tested code that runs the calculators in the product, and the whole scenario is reproducible in the Dilution Simulator inside the app.
Sources
The figures above are computed by the same tested code that runs the calculators in the product. The full course is one purchase, described on the pricing page.