SAFE Note Conversion Calculator

A SAFE (Simple Agreement for Future Equity) is a convertible instrument that gives an investor the right to receive equity in a future priced round, rather than equity today. Created by Y Combinator, it has become the standard instrument for angel and seed-stage investments in Indian startups.

Unlike convertible notes, SAFEs are not debt — they carry no interest rate or maturity date. They convert automatically when the startup raises a priced equity round above a threshold (typically ₹5 Cr+).

Valuation cap

Sets a ceiling on the valuation at which the SAFE converts. If the cap is ₹10 Cr and the next round values the company at ₹25 Cr, the SAFE investor converts at the ₹10 Cr valuation — getting 2.5× more shares than a round investor for the same money. The cap rewards early investors for taking more risk.

Discount rate

Gives the SAFE investor a fixed percentage discount on the next round's price per share. A 20% discount means they pay ₹8/share when round investors pay ₹10/share. The discount ensures the SAFE investor gets a better deal for being early.

Most SAFEs include BOTH a cap and a discount. The instrument converts using whichever gives the investor MORE shares — effectively, whichever results in a lower effective valuation.

When the startup raises a priced round (typically Series A), the SAFE automatically converts. The investor receives shares in the company at the better of:

1. The valuation cap price — shares calculated as if the company were valued at the cap.
2. The discounted price — shares calculated at the round price minus the discount rate.

The investor's shares come from the founders' pool or a new issuance, diluting existing shareholders. The priced-round investors also get their shares at the round price. The SAFE investor always ends up with a better price than the round investors.

The main advantage of a SAFE for founders is speed and cost — no need to negotiate a valuation or issue shares immediately. The valuation is effectively deferred until the priced round. For investors, the cap and discount compensate for the risk of investing early without a set valuation.

SAFEs in India must be structured carefully under company law. Unlike the US, Indian law treats SAFEs as a form of compulsory convertible instrument, which has specific filing requirements with the MCA and may have FEMA implications for foreign investors.

A ₹50L SAFE at a ₹10 Cr cap on a ₹25 Cr pre-money Series A gives the SAFE investor ~5% of the company. The priced-round investor putting in ₹5 Cr gets ~16.7%. Together they dilute existing shareholders by ~21.7%. If you raised the full ₹5.5 Cr as a priced round at ₹25 Cr pre, the dilution would be ~18%. The difference is the cost of using a SAFE — compensated by raising earlier and faster.