SAFE & Convertible Note Calculator

A SAFE (Simple Agreement for Future Equity) is a financing instrument created by Y Combinator that allows startups to raise capital without setting a valuation. Instead of issuing shares immediately, a SAFE converts into equity during a future priced round (like a Series A). SAFEs are simpler and cheaper than convertible notes because they have no interest rate, maturity date, or repayment obligation. Learn more about how SAFEs compare to other instruments in our SAFE vs convertible note guide.

When a priced equity round occurs, the SAFE converts into shares. The conversion price is the lower of two calculations: the cap price (valuation cap divided by pre-money shares) or the discount price (Series A price per share multiplied by one minus the discount rate). The investor receives shares equal to their investment divided by this conversion price. This means SAFE holders always get the better deal between the cap and the discount. Use our equity dilution calculator to model the full impact on your cap table.

A valuation cap sets a maximum company valuation at which the SAFE or note converts, protecting the investor if the company grows significantly before the priced round. A discount gives the investor a percentage reduction off the Series A price per share. Both mechanisms reward early investors for taking more risk. When both are present, the investor gets whichever produces a lower conversion price (more shares). For example, with an $8M cap and 20% discount on a $10M Series A, the cap produces a better deal for the investor. Read our startup equity dilution guide for more context.

Convertible notes accrue simple interest over their term. The accrued interest is calculated as: Principal × Annual Interest Rate × (Term in Months / 12). When the note converts, both the principal and accrued interest convert into equity at the conversion price. For example, a $500,000 note at 5% interest over 18 months accrues $37,500 in interest, so $537,500 total converts into shares. This is one key difference from SAFEs, which have no interest component. Compare both instruments with our business valuation calculator.

MFN (Most Favored Nation) is a clause in some SAFEs that gives the investor the right to adopt the terms of any subsequent SAFE issued by the company on better terms. For example, if an early SAFE has no valuation cap but a later SAFE includes an $8M cap, the MFN holder can amend their SAFE to include that $8M cap. This protects early investors who invest before the company has enough traction to set a cap. MFN SAFEs are common in very early pre-seed rounds. For more on structuring early-stage funding, see our SAFE vs convertible note comparison.

SAFEs are generally preferred for pre-seed and seed rounds because they are simpler, have no maturity date or interest, and are founder-friendly. Convertible notes may be preferred when investors want debt-like protections (interest accrual, maturity date, repayment rights) or when raising from investors who are more familiar with traditional debt instruments. Notes are more common outside Silicon Valley and in later bridge rounds. Consider using our equity dilution calculator alongside this tool to understand the full dilution impact of either instrument on your cap table.