Article · 6 min read

Numerical Example: SAFE, Cap and Discount

FundersClub Free Intermediate

This is the worked dilution example, actual numbers, not a hand-wave: a $100k SAFE with an $8M cap and a 15% discount converting into a round priced at $0.909 per share, showing the discount price ($0.77265) versus the cap price ($0.72727), why the cap wins, and the exact 137,500 shares issued. Change the inputs to your own cap and you can compute your dilution before you sign.

• When a SAFE has both a cap and a discount, only one applies: whichever produces the lower price per share, which means more shares to the investor
• On an $8M cap into a $0.909 round, the cap price of $0.72727 beats the 15% discount, so the cap is the operative term
• Once your next round is priced well above the cap, the cap does all the dilution work and the discount becomes irrelevant