Understanding SAFEs and Priced Equity Rounds by Kirsty Nathoo

YC Partner Kirsty Nathoo gives the lowdown on several different ways to capitalize your company and how those impact founder equity and cap tables overall.

00:00 Introduction
3:53 SAFEs
10:15 Post-money SAFEs
14:35 Dilution
22:40 Priced rounds
27:44 Priced round dilution math
41:07 Top tips
42:48 Don't over-optimize
44:08 Conclusion

[chapterme]

Chapters (Powered by ChapterMe) -
00:00 - Introduction
03:53 - SAFEs
10:15 - Post-money SAFEs
14:35 - Dilution
22:40 - Priced rounds
27:44 - Priced round dilution math
41:07 - Top tips
42:48 - Don't over-optimize
44:08 - Conclusion

[jamiejswagga]

Great job Kirsty and thank you YC! Keep putting out more of this gold!

[sikhswim]

Clearest and most coherent explanation of this I’ve ever seen. Thanks Kirsty!

[rajinderyadav]

Kirsty does a fantastic job of explaining how to understand the fund raising process, the fog has lifted. I feel more comfortable about approaching raising capital and need to start thinking about my cap tables.

[MegaXerk]

Thanks Kirsty, my understanding of SAFEs significantly evolved. I always thought SAFEs always get unlocked at the same valuation as the next round but TIL that there can be a valuation cap introduced.

[monika]

Approachable summary for new founders to understand SAFEs, thank you

[jordglobal]

Thanks for articulating clearly, she knows her stuff!

[Shakti_Singh_Om]

It can't be explained better. thanks Kirsty and YC

[consommableechographiealge]

thank you kirsty

excellent ptesentation, I explained the math sife however I fidnlt catched legal and financial terms, maybe because I am not familiarized with options and stocks or maybe the problem is my weak english but I can feel how much important your presentation for any founder, who know maybe one day I visit YC and you explain all these things in details face to face😊

All my encouragements

[cahiker]

This was EXTREMELY valuable. Would take an entire 1-day, hands-on, scenario planning workshop on this subject. Let’s fire up Excel on the laptop and model these types of scenarios so we (investors and startups) can get smarter about how equity ownership plays out over time. Has anybody built an app to model these types of scenarios?

[henrikcarmel]

A perfect presentation - in proper understandable english. She smiles with her eyes😃
The effects - and dilution potential - of the SAFE concept is finally fully understood.

[daryaslizh]

I really liked the explanation of SAFe, best I found so far

[estegy]

Kristy is an amazing instructor, ,, great job

[victora]

Hi.
I think there is a mistake on shares quantity calculation on min (39:11).
new group -> [Options available + Lead investor + Other investor] -> 10%+20%+5%=35%

old group -> [Founders + Options Issued + SAFE inv A + SAFE inv B] -> 65% - total issued= 9, 250, 000+650, 000+588, 235+1, 176, 470=11, 664, 705


Hence new group calculation (post money cap):
Options available: (10% / 65%)*11, 664, 705=1, 794, 570 (-12 shares in video)
Lead investor: (20% / 65%)*11, 664, 705=3, 589, 140 (+235 shares in video)
Other investors: (5% / 65%)*11, 664, 705=897, 285 (+59 shares in video)


Do I missed something?

[charliekaru]

Excellent work Kirsty.. Totally explained it super clearly

[delbertwhitejr.]

A great presentation on how to capitalize a venture, through the venture's life-cycle, and how to drive your capital financing process. YC continues to pay dividends.

[Emmaxson]

This makes a lot of sense ❤
Thanks Kirsty

[harpreetgill]

This was incredible. Can we have the excel sheet where this was calculated? Tried mimicking the calculations, got ~305 shares off, so although most of the #s tally, some are off in last few decimals. If the original is available, can reverse engineer to see where I went wrong?

[elijahvdp]

Great presentation.
One thing that you didn't explain and that i can't figure out is the option pool increase. How did you get to 1.695M?

[AlanDeRossett]

good explanation Q: How is a Safe recorded if not a debt and not a share represented in a cap table? ie: for Benefit Corp? Typically a Benefit Corp will have a recital on the Stock certificate issued representing the Articles of Incorporation amendment after 2/3rd of stockholders elect to become a Benefit Corp. This could happen after a safe was issued.