If we consider the first series as an example, we first apply the 20% discount on the $2,000,000 pre-money valuation proposal, which gives us an valuation of USD 1,600,000. Based on the safe investment of $500,000, that is, the SAFE investor holds 31.25% of the shares before the stake (500,000 USD/1,600,000 USD). Again, if the number of SAFE shares is X, then X/ (X-3,000,000) – 31.25%. This equation gives 1,363,636 SAFE shares and 4,363,636 total pre-currency capitalization. As shown in the table above, demand from the SAFE investor decreases again if the valuation before the money increases as expected, but if we calculate the price per share, the discount on the share price is maintained. If we take the difference between these prices ($0.09) and divide it by the share price ($0.46), we see that the discount per share is 20%. We started with the update of the evaluation, so it`s a confirmation that the method works. If participation should not be calculated on the basis of a pre-money valuation, you cannot simply use the simple stock delivery method described above. To determine a price per share on the basis of an valuation, you must calculate the pre-valuation by dividing by pre-money capitalization which includes converted FAS that needs a price per share to calculate the number of shares.
It`s recursive, and in math, it`s basically a limit instead of a fixed amount, so again… It`s not easy. If you`ve spent some time in the startup ecosystem over the past decade, you`re probably familiar with the concept of Simple Agreement for Future Equity (SAFE). First launched by YCombinator in 2013, SAFE has proven to be a fast and efficient way to raise capital. Although SAFes are called “easy” (that`s exactly the name! ), FAS can often be confusing for the uninitiated.