Pre-money SAFE

A pre-money SAFE prices conversion the way a traditional convertible note does: the valuation cap is divided by the company's fully-diluted share count before the round to produce a conversion price per share, and the SAFE's principal buys shares at that price. Unlike a post-money SAFE, the investor doesn't get a clean, fixed ownership percentage — the actual percentage depends on the pre-round share count and on any other convertibles converting alongside it.

Why the distinction matters

Pre-money and post-money SAFEs with an identical-looking cap ('$4M cap') are not equivalent instruments. A post-money cap divides the investment by the cap directly (investment ÷ cap = ownership). A pre-money cap divides the cap by the pre-round share count to get a price, and the investor's eventual ownership comes out lower than the post-money equivalent whenever the pre-round base is larger than implied. Reading a term sheet's SAFE type is not optional — the difference compounds every time you stack another instrument on top.

Discount interacts the same way

Pre-money SAFEs also support a discount rate. Whichever price is lower — the cap price or the discount price (round price × (1 − discount)) — is what the investor gets, since a lower price means more shares for the same principal. This 'investor gets the better of the two' rule is the same spirit as the post-money SAFE's cap-vs-discount comparison, just expressed in price terms instead of share terms.

Where you'll still see these

Pre-money SAFEs are rarer today — most US seed deals use YC's post-money template — but they still show up in older cap tables, some international deals, and certain accelerator programs. Foundily's SAFE calculator supports both types explicitly so you don't have to convert the math by hand.