How to use the SAFE and convertible note calculator
SAFEs (Simple Agreements for Future Equity) and convertible notes are popular choices for a startup’s initial capital raise. There are a number of reasons for this, including:
Speed: These agreements are simpler and shorter relative to a preferred stock financing (e.g. Series Seed or Series A), accelerating the process from initial terms to close.
Cost: Priced rounds often require startups and investors to invest far more in up-front legal fees.
Terms: Traditional rounds require founders to commit to terms like a fixed valuation, despite uncertainty in the early stages of a company, while a SAFE or Note offers additional flexibility.
Despite being simple agreements, predicting the future impact of a SAFE or Note on your ownership can be complicated.
Multiple variables come into play: valuation caps, discounts, interest rates, and other terms that can have a significant impact on the ownership structure of your company.
Carta’s SAFE and Convertible Note Calculator empowers you to run these calculations with ease, allowing you to:
View pre and post-money dilution before and after a future priced round, visualizing your ownership at multiple future valuations.
Model multiple Notes or SAFEs and a priced round to account for all anticipated fundraising activity between now and the completion of a future priced round.
Assess the potential impact of different types of convertibles, including pre-money SAFEs vs. post-money SAFEs (also known as YC SAFEs).
The Carta calculator covers the following convertible instruments:
Pre-money SAFE | The valuation cap on a SAFE refers to the pre-money valuation. |
Post-money SAFE (ownership % SAFE / YC SAFE): | The valuation cap on a SAFE refers to the post-money valuation. |
Convertible note (assume pre-money approach) | The convertible note model assumes the pre-money approach; we recommend you assume some amount of interest will accrue and be converted with the principal, based on applicable interest rate and anticipated time elapsed prior to conversion. |
Steps to model a round
To view the current capitalization for a company that is currently live on Carta, navigate to Cap table > View by stakeholder.
Here you will gather:
Total fully diluted - Enter the total number of common shares a company would have if all possible sources of conversion were exercised. This includes Founder equity, other equity outstanding (including outstanding options), and shares available for issuance under the stock plan. This total is found at the top left of the Cap Table by Stakeholder as shown to the left.
Your ownership - Enter your issued and outstanding shares (including options, if any). The total will be visible in the Fully diluted column in the Cap table > View by stakeholder page, as shown to the left.
Options remaining in the available pool - Enter the balance (remaining) shares of common stock currently available for issuance under the stock plan pool. This number is found at the top right of the Cap Table by Stakeholder as shown to the left.
1. Current cap table.
On safes.carta.com, you’ll enter in the values you pulled from your current cap table.
2. First priced round
Input your estimated new investment (excluding SAFEs and Notes), your pre-money valuation, and the percentage of the available option pool.
3. Add SAFEs and Convertible Notes
SAFEs Select the Safe type (pre-money or post-money). Input the Principal, Valuation Cap, and Discount. (Share price, converted shares and Ownership percentage will populate automatically when the model runs calculations.)
Convertible Notes Input the Principal + assumed interest to be accrued, Valuation Cap, and Discount. (Share price, converted shares and Ownership percentage will populate automatically when the model runs calculation. We’ve included those calculations below.)
4. Run model
Once you’ve finished populating the fields, click outside of the text field to calculate.