> tpl_stv_017
SAFE/Convertible-Instrument Requirements Worksheet
Seed and pre-seed bridge financing instrument evaluation and dilution modeling worksheet comparing Post-Money SAFEs (Valuation Cap vs Discount Only vs MFN), Pre-Money SAFEs, and Convertible Promissory Notes (interest accruals, maturity date default remedies, and qualified financing conversion thresholds).
Early-stage financing worksheet evaluating post-money SAFEs, convertible notes, valuation caps, discount rates, and dilution math.
Important Tech Document Template & Operational Notice
TinyCTO.tv Tech Document Template Notice: This template is a general educational and operational starting point. It is not legal, tax, accounting, investment, procurement, regulatory, security or certification advice. Requirements vary by jurisdiction, organization, contract and risk. Review and adapt it with qualified professionals before relying on it.
Problem Solved
Founders stack multiple SAFEs with varying valuation caps and discount rates on top of each other without realizing they are giving away 30-40% of their company before the priced Series A round even starts.
When to Use
- •Evaluating and issuing Y Combinator Post-Money SAFEs or Convertible Promissory Notes to angel investors and seed syndicates
- •Modeling cap table dilution and conversion share prices across competing SAFE terms (Valuation Cap vs 20% Discount vs MFN clause)
- •Structuring bridge financing rounds between formal priced equity venture financing events
When NOT to Use
- •For formal priced preferred equity financing documents (use TPL-STV-016 and TPL-STV-008)
- •For overarching corporate bylaws, share authorizations, and board minutes (use TPL-GOV-001)
5 Template Sections & Structural Outline
Core structural differences: Debt vs equity contract, interest rate accruals (typically 6-8% on notes), maturity dates (debt repayment defaults), and the simplicity of standard YC post-money SAFEs.
Mathematical mechanics of conversion: How the investor gets the lower of the Valuation Cap share price or the Discount Rate (typically 20%) applied to the next round share price.
Calculating the cumulative dilution when a startup signs multiple SAFEs over 18 months (e.g. $500k at $6M cap, $1M at $10M cap, $750k at $12M cap), revealing the true founder ownership haircut.
Evaluating common non-standard investor requests: MFN clauses (inheriting better terms granted to subsequent SAFE holders), major investor information thresholds, and pro-rata side letters.
How SAFEs convert into Series A Shadow Preferred Stock upon a Qualified Financing threshold (typically $2M-$5M raise) and their seniority ranking in a distressed early exit.
Completion Instructions
Independent Review Checklist
- All mandatory sections completed
- No secrets or passwords included
- Executive sponsor sign-off obtained
SAFE/Convertible-Instrument Requirements Worksheet - Worked Case Study
Fictional Entity: Autonomous Enterprise DevOps Platform raising $2.5M Seed Bridge via Post-Money SAFEs
Real-world production case study demonstrating complete operational adoption for Autonomous Enterprise DevOps Platform raising $2.5M Seed Bridge via Post-Money SAFEs.
- •Modeled 3 rolling SAFE tranches ($500k at $8M cap, $1M at $12M cap, $1M at $15M cap) without cap table surprises
- •Prevented 14% unmodeled founder dilution at Series A conversion through proactive shadow-stock simulation
- •Eliminated punitive maturity default covenants by transitioning angel notes to standard YC Post-Money SAFEs
Frequently Asked Questions
Why did Y Combinator switch from Pre-Money SAFEs to Post-Money SAFEs in 2018?
Under the old Pre-Money SAFE, founders and investors could not calculate exact dilution until the subsequent priced Series A round closed, because each SAFE diluted the other SAFEs in an unpredictable mathematical circular loop. The Post-Money SAFE fixes the investor ownership percentage at the exact moment the SAFE is signed (Investment / Cap), making founder dilution completely transparent.
What happens to a SAFE if the startup is acquired before raising a priced Series A round?
If a change of control (acquisition) occurs before a priced round, standard SAFEs give the investor the choice between: 1. Receiving a 1.0x cash return of their original investment (capital return preference), OR 2. Converting into common shares based on the Valuation Cap and participating in the acquisition proceeds alongside founders.
Why should early-stage founders be cautious about granting Most Favored Nation (MFN) clauses?
An MFN clause guarantees that if the startup later issues SAFEs with more favorable terms (e.g., a lower valuation cap or higher discount), the earlier MFN investor automatically receives those same terms. If market conditions deteriorate and the startup is forced to lower its valuation cap to close remaining capital, the MFN clause retroactively reprices the earlier investments downwards, crushing founder equity.
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Authoritative Sources
- Y Combinator Post-Money Safe Documents and User GuideY Combinator • OFFICIAL REQUIREMENT
- NVCA Model Convertible Note Term Sheet and Purchase AgreementNational Venture Capital Association • OFFICIAL REQUIREMENT
- The Safe Primer: How Post-Money SAFEs Work in Venture CapitalClerky Startup Legal Handbook • OFFICIAL REQUIREMENT