If you’re raising early money through SAFEs or convertible notes, you’re not alone. Most early-stage founders use them. They’re fast, lightweight, and let you skip the stress of pricing your company too early.
But while the docs are simple, the math behind them isn’t.
Every SAFE or note you sign affects your cap table. Every cap, discount, and term changes how much ownership you’re giving up later. If you’re not modeling these properly—or at all—you’re flying blind into your next round.
And when conversion day comes, that can cost you more equity than you ever expected.
This article is here to help you fix that. We’ll walk through how SAFEs and notes actually work inside your cap table, why most founders get it wrong, and how to model them in a way that gives you clarity, control, and confidence when it matters most.
Let’s get into it.
What Most Founders Miss About SAFEs and Notes
They’re Not Invisible—They’re Just Delayed
Founders often treat SAFEs and notes like future problems. You raise money, issue a few docs, and move on. There’s no equity on the cap table yet, so it feels like nothing’s changed.
But that’s an illusion.
SAFEs and notes are future promises. And those promises have a price. Each one is a claim on your company—just one that hasn’t shown up in your spreadsheet yet. If you’re not tracking those claims in real time, you’ll be shocked at how much ownership you’ve already given away.
Waiting until the Series A to figure it out is too late. By then, you’re doing damage control.
Multiple Instruments Mean Multiple Outcomes
Not all SAFEs are created equal. Some have valuation caps. Others have discounts. Some are pre-money. Others are post-money. Convertible notes throw in interest and maturity dates.
Each of these features affects how conversion happens. And when you have a mix of instruments, they don’t convert the same way. That’s where chaos begins.
If your cap table doesn’t reflect those differences—or worse, if you’re not tracking them at all—then you’re operating with a false sense of control. You might think you’re raising a clean round, but under the surface, things are piling up.
You need to treat every SAFE and note like it’s already equity. Because soon, it will be.
How SAFEs and Notes Actually Convert
The Priced Round Triggers It All
The key moment is the equity financing round. That’s when your company sells preferred shares to a new investor and sets a formal valuation. At that point, all your SAFEs and notes convert into equity.
But how they convert—and at what price—depends on their terms.
A SAFE with a valuation cap converts at the lower of the round price or the cap. A SAFE with a discount applies that discount to the round price. Convertible notes may include both a cap and a discount, plus interest that compounds over time.
These details determine how much equity each early investor gets. And that, in turn, determines how much equity you still own.
If you’re not modeling that math from the start, you can’t make informed decisions about what to raise—or when to stop.
Why Modeling Matters (and What Happens If You Don’t)
You Can’t Fix What You Don’t See
The moment you issue your first SAFE or note, your cap table starts changing—even if it doesn’t look like it. That document might be just a few pages, but it carries real weight. It’s a claim on future ownership. And the only way to manage those claims is to model them—clearly, accurately, and continuously.
If you don’t model them, two things happen. First, you lose track of how much equity you’ve promised. Second, you stop making data-backed decisions. You raise another $100K without realizing it pushes you past a safe threshold. You offer a new investor better terms without seeing how it affects earlier ones.
This is how founders walk into their seed round thinking they still own 70%—and walk out owning 42%.
It doesn’t happen overnight. It happens bit by bit. Each SAFE or note adds pressure. And if you’re not watching the total stack grow, that pressure eventually cracks your cap table.
Your Lead Investor Will Do the Math—So You Should Too
Let’s be blunt. If you’re raising a real priced round, your lead investor is going to run the numbers. They’ll model your fully diluted ownership. They’ll track every SAFE and note. They’ll understand how conversion works—and if they find mistakes, they’ll assume it’s because you didn’t.
That’s not a good look.
The fastest way to earn trust with a VC is to show up with a clean cap table and a complete conversion model. You don’t need to be a CFO. You just need to show that you’ve done the work.
Modeling gives you leverage. It tells investors: I’ve got this. I’m leading this round on purpose, not just on instinct.
The Right Way to Build Your Cap Table
Start With Your Equity Today
The best modeling starts with what you already have. Begin by writing down exactly how much equity is outstanding. This includes founder shares, early hires, and any equity grants you’ve made. Don’t skip this step. If you’re off at the start, every conversion will be off too.
Then add your current option pool. Note how much is issued, how much is available, and what percentage that represents of the total. Investors will want to know, and it directly affects dilution calculations.
Add Each SAFE or Note—One by One
Every SAFE or note should be listed with its exact terms. That means:
- The investment amount
- The valuation cap (if any)
- The discount (if any)
- Whether it’s pre- or post-money
- For notes: the interest rate and maturity date
Each of these factors affects how much ownership the investor gets at conversion. If you lump them together or generalize, your model won’t be accurate.
For SAFEs with post-money caps, the math is straightforward. You divide the investment by the cap to get a fixed ownership percentage. That’s why post-money SAFEs are easier to model—and riskier to over-issue.
For pre-money SAFEs and notes, the math is a bit fuzzier. The final ownership depends on how much other capital is raised and how much new equity is created. That’s why they require scenario modeling. You have to make assumptions about the priced round to estimate outcomes.
Model Scenarios, Not Just Snapshots
A good cap table model doesn’t just show today—it shows the future.
Set up a few basic scenarios. For example, what happens if you raise a $3M seed at a $12M valuation? What if it’s a $5M raise at $15M? How do your SAFEs and notes convert in each case? How much dilution do you experience?
This gives you a range. And it helps you understand when to stop raising on SAFEs, when to move to a priced round, or when to renegotiate a note before it becomes a problem.
It also gives you the confidence to answer investor questions with clarity—not with guesswork.
Modeling Tools: What Founders Actually Use
You Don’t Need a Complex System—But You Do Need a System
Early-stage founders don’t need full-on finance stacks. You don’t need Carta just to model SAFEs. But you do need a simple spreadsheet that tracks every term, every amount, and every conversion logic.
Y Combinator offers a free SAFE conversion calculator. Cooley’s GO platform has cap table templates. You can also build your own in Google Sheets using basic formulas.
What matters most is that it’s alive. You update it every time you raise a dollar. You include every SAFEs terms, clearly. And you check it before you make your next fundraising decision.
Modeling isn’t a one-time task. It’s how you run your company with your eyes open.
What Post-Money Really Means (and Why It Matters)
Post-Money SAFEs Lock In Ownership
Many founders misunderstand what “post-money” means. They hear the term and assume it refers to the company’s value after the SAFE converts. But that’s not quite right.
With a post-money SAFE, the cap represents the company’s value after all SAFEs convert but before the new money in the priced round comes in. That sounds subtle—but it changes everything.
Why? Because a post-money SAFE gives the investor a fixed ownership percentage based on the total cap. It doesn’t flex based on what other SAFEs you’ve signed. So if you raise $100K on a $5M post-money cap, that investor owns 2% of the company—period.
Raise another $100K on the same cap? That’s another 2%.
Keep going without realizing this, and you’ll stack 2% after 2% until you’ve quietly given away 25% or more without issuing a single share.
This is where most modeling mistakes begin. Founders think they’re safe (pun intended) because the equity hasn’t “converted” yet. But under a post-money SAFE, the dilution is real. It’s just hidden—until the day it hits.
Pre-Money SAFEs and Notes Leave Room for Assumptions
Pre-money SAFEs and notes don’t lock in ownership percentages. Instead, they convert based on the new shares being issued in the priced round. This makes them harder to model because the actual dilution depends on how big the round is, how much is raised, and what your option pool looks like.
For founders, this offers some flexibility. You can still control the dilution by managing the round size. But it also introduces uncertainty. You can’t say exactly how much equity you’re giving away until the round is priced and the shares are issued.
That’s why modeling scenarios is so important with pre-money instruments. You’re not just trying to calculate a number. You’re trying to understand a range of outcomes—and what tradeoffs you’re comfortable with.
Mistakes That Creep In (and How to Prevent Them)
Forgetting to Include Interest on Notes
Convertible notes accrue interest—usually simple interest, not compounding. If you raise a $200K note at 6% interest and convert 18 months later, that’s $218K converting, not $200K.
That extra $18K might not seem like a big deal. But if the cap is low, and the company’s valuation is high, it can translate to thousands of additional shares—diluting founders even further.
When modeling, always include a column for accrued interest. Estimate the number of months until conversion, and plug in the interest rate. The total principal plus interest is what you model for conversion.
Not Accounting for Option Pool Expansion
When you raise a priced round, investors will almost always ask you to expand your option pool. They want the pool to exist before they invest, so it doesn’t dilute their shares.
But here’s the catch: it dilutes yours.
If you don’t model this in advance, you’ll be caught off guard. You’ll agree to a 10% pool, then realize that your own ownership just shrank—not because of a new investor, but because of a hiring plan you haven’t even started executing.
A clean cap table model should let you toggle option pool sizes. Try 10%. Try 15%. See how it changes your ownership and the post-money equity split. These aren’t just numbers—they’re tradeoffs you’ll need to understand before you negotiate a term sheet.
Issuing Different Terms to Different Investors
Founders sometimes change SAFE terms check by check. They offer a $5M cap to one investor, then a $7M cap to another a month later. It feels like a way to close more deals. But it creates chaos at conversion.
Why? Because each investor now converts at a different price per share. And the more variation you have, the harder it is to model your total dilution.
That’s why best practice is to set a round target—say, $500K at a $6M cap—and stick to it. If your traction improves, open a new round with new terms. But don’t mix and match within the same raise.
A messy SAFE stack is harder to clean up than it is to avoid.
How to Present Your SAFE and Note Stack to Investors
Transparency Builds Trust—Even If It Hurts
When it’s time to raise a priced round, every serious investor will ask the same question: “What’s already on the cap table?”
This is your chance to either build trust—or lose it.
If you’ve been modeling from the start, you’ll have a clean breakdown: how many SAFEs, how much was raised, what caps were used, and what conversion scenarios look like based on the proposed valuation. That’s the kind of clarity that turns a maybe into a yes.
If you haven’t modeled it—or worse, if you’ve mixed terms and can’t explain the outcome—investors will start to wonder what else you haven’t thought through.
That doesn’t mean everything has to be perfect. It means you need to show your work. When you can say, “Here’s our total SAFE stack, here’s how it converts at different valuations, and here’s how we’re planning our option pool,” you change the conversation.
You’re no longer the founder asking for money. You’re the founder in control of the business.
Make It Visual. Make It Simple.
Investors are busy. They don’t want to dig through your model to find the punchline. So make it easy for them.
Summarize your pre-conversion cap table. Show what it looks like after all SAFEs and notes convert. Highlight the key inputs: valuation cap, round size, option pool assumptions.
Then add a simple chart: here’s founder ownership, investor ownership, and total dilution under different scenarios.
This isn’t just a numbers exercise. It’s storytelling. You’re saying, “Here’s what we’ve raised, here’s what it means, and here’s how we’re preparing for what’s next.”
And the cleaner your story, the stronger your position.
When to Stop Using SAFEs (and Start Pricing Your Round)
SAFEs Are a Tool—Not a Long-Term Strategy
In the beginning, SAFEs are a gift. They let you raise money fast, keep things simple, and delay tough decisions. But over time, they pile up. And once your SAFE stack hits a certain size—say, $1M or more—it starts doing real damage to your future ownership.
At that point, it’s time to consider a priced round.
A priced round gives you clarity. It fixes your valuation, converts all those SAFEs, and puts structure around your company. It also shows new investors that you’re serious about the next stage.
So how do you know when you’re ready?
If your product has traction, your SAFE stack is getting heavy, and your next raise will be from institutional investors—you’re ready.
But don’t wait until it’s urgent. Start modeling now. Know what your ownership looks like before that next round begins. That’s how you raise from a position of strength, not surprise.
Why IP and Cap Table Clarity Go Hand in Hand
Your Company’s Value Isn’t Just the Code
If you’re building a robotics, AI, or deep tech company, your IP is your moat. It’s what makes you defensible. It’s what makes your future rounds attractive. But your IP only matters if you own it—and your cap table is how that ownership shows up.
If you’ve issued too many SAFEs without modeling the impact, you may have already given away large chunks of your company—before protecting the core inventions. That makes it harder to file clean patents. It complicates founder control. And it may raise red flags in diligence when investors see unclear ownership around IP assets.
Clean cap table modeling protects more than equity—it protects your edge.
That’s why at Tran.vc, we help founders build both at once. While you’re raising and developing, we invest up to $50,000 in in-kind IP services to help you patent your work and track your equity at the same time. We make sure your documents—and your ownership—stay aligned.
Because if your company’s most valuable asset is the technology you’re building, you shouldn’t risk losing control of it by accident.
Why Cap Table Modeling Is a Founder Skill—Not a Finance Task
You Can’t Delegate Ownership
Too many founders treat cap table modeling as something to outsource. They assume the lawyer or the platform will handle it. And they only start paying attention when the numbers start to hurt.
But by then, it’s usually too late to undo the damage.
Understanding your cap table isn’t about running perfect models. It’s about understanding your power. It’s about knowing how much leverage you really have, and how every dollar you raise affects your ability to lead, hire, and grow.
You don’t need to be a finance expert. But you do need to know how to read your own dilution.
Founders who understand this don’t just raise cleaner rounds. They lead with more confidence. They negotiate on terms they understand. And they build companies that last—because they’re built with eyes open.
And you don’t have to do it alone.
At Tran.vc, we work with technical founders before the dilution happens. We help you model clearly. Raise intentionally. And protect what matters—so when the big round comes, you’re ready.
Apply now at tran.vc/apply-now-form
Final Thought: You Can’t Build What You Can’t See
SAFEs and notes are tools. But like any tool, they only help if you know how—and when—to use them.
Modeling your cap table isn’t just for your seed round. It’s how you build with clarity from day one. It’s how you avoid giving away too much, too early. And it’s how you stay in control of the company you’ve worked so hard to create.
You don’t need perfect projections. But you do need a plan. You need a way to see how your decisions today will affect your options tomorrow.
Every SAFE you issue is a promise. Make sure you understand what you’re promising. And more importantly, what it costs.
If you’re a deep tech or AI founder who’s ready to raise smart—not sloppy—we’re here to help.
Apply now at tran.vc/apply-now-form
Because your cap table tells the story of your company. Make sure it’s one you still want to be part of.