Pre-money SAFE is a Simple Agreement for Future Equity that converts into preferred stock based on pre-money fully diluted share count at the qualifying priced round—often creating opaque dilution when multiple SAFEs stack.

How it works

Classic pre-money SAFEs divide investment amount by cap-derived price per share using shares outstanding before the new round—but including other converting instruments. Each additional SAFE changes the denominator for everyone else. Founders sometimes signed sequential SAFEs without a live model, then discovered aggregate investor ownership far exceeded expectations at Series A.

Post-money SAFEs largely replaced pre-money templates for transparency, but legacy pre-money SAFEs remain on many cap tables. Conversion at priced round applies discounts and most-favored terms per document.

Why it matters

• Founders: Run a full cap table scenario before signing any SAFE; pre-money stacking punishes late modeling.
• Investors: Lead investors at Series A scrutinize pre-money SAFE stacks for excessive seed overhang and side letter terms.

Common mistake

Assuming each SAFE’s cap percentage adds linearly. Pre-money mechanics interact—later SAFEs dilute earlier SAFE holders too, not only founders.

Related ideas

See post-money SAFE, priced round, and bridge round.