Article · 15 min read

Understanding SAFEs and Priced Equity Rounds

Kirsty Nathoo · Y Combinator Free Beginner

This is the source document for the entire SAFE debate, written by YC's CFO who papered thousands of these. It walks the actual dilution math (why post-money SAFEs are cleaner than pre-money), what a priced round buys you that a SAFE does not (defined ownership, a board), and the trap of stacking SAFEs at low caps that you only reconcile at the Series A. Read this before you copy any template.

  • A SAFE is not debt: no interest, no maturity date, no repayment, which is why it closes in days while a priced round takes weeks of lawyering
  • Post-money SAFEs make your dilution knowable at signing; that clarity is the whole reason YC moved off the pre-money version
  • Price the round when investors want defined ownership and a board seat, or once stacked SAFE caps make the conversion math unpredictable
Open on ycombinator.com ↗

The question it answers

  1. SAFE or priced round: which instrument should I use for my first raise, and does it work in India?

Read with it

  1. A practising senior partner spells out exactly why a raw US SAFE is dangerous for an Indian entity: it can be treated as a... Bar & Bench Article · 10 min read Convertible Notes and SAFE Notes in India: The Dilemma Madhavan Srivatsan
  2. Once you accept you are using CCPS, this is the operator's manual for what that instrument actually carries: 1x... Treelife Article · 18 min read CCPS SAFE Notes in India: Structure, Investor Rights, and Compliance Treelife
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