# Safe Vs Priced Round > Use when a founder is choosing how to structure a raise. Triggers on "SAFE vs priced round", "should I use a SAFE", "valuation cap vs discount", "post-money SAFE", "convertible note", "when to do a priced round", "MFN clause". Explains the instruments and their real dilution consequences. - Skill: `skillmedev/safe-vs-priced-round` (Agent Skill) - Install (CLI): `npx skillmds@latest add skillmedev/safe-vs-priced-round` - Raw SKILL.md: https://api.skillmd.com/api/skills/skillmedev/safe-vs-priced-round/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - Author: SkillMedev (https://skillmd.com/u/skillmedev) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/skillmedev/safe-vs-priced-round --- # SAFE vs Priced Round The instrument you raise on decides how much you dilute, when, and how much control you trade - often more than the headline valuation does. Founders who treat the SAFE as "free money now" get a nasty surprise at the priced round. This skill makes the choice deliberate. ## When to use this skill Use it during [[fundraising-stage-selector]] when sizing the round and before signing anything. Model every choice through [[cap-table-manager]] so the dilution is real, not abstract. ## The instruments ### SAFE (Simple Agreement for Future Equity) - No interest, no maturity, converts to equity at the next priced round. - Fast (signable in days, legal cost near zero on standard docs), cheap, standard (Y Combinator post-money SAFE). Dominant at pre-seed and seed. - **Post-money SAFE**: the investor's percentage is fixed at signing; *founders* absorb the dilution of later SAFEs and the new-round pool. This is the common form - know that you dilute around it. - **Pre-money SAFE** (older): SAFE holders dilute each other; murkier math. ### Convertible note - Like a SAFE but it is debt: carries interest (commonly 2-8%) and a maturity date (commonly 18-24 months). Rare outside specific situations; the maturity date is a real risk if the next round slips. ### Priced equity round - You sell shares at an agreed valuation now. Sets a real price, a board seat, and full terms (preferences, protective provisions). More legal cost and time - typically several weeks to close and tens of thousands of dollars in combined legal fees, versus days and near-zero for a standard SAFE. - Standard at Series A; also common at larger seeds. ## The SAFE terms that decide your dilution - **Valuation cap**: the maximum valuation at which the SAFE converts. Lower cap = more dilution for you, more upside for the investor. The most negotiated term. Quick check: on a post-money SAFE, amount raised รท post-money cap = the percentage you just sold ($500k on a $5M cap is 10%, full stop). - **Discount**: a percentage off the next round's price (typically 10-20%). - **Cap vs discount**: investors take whichever is better for them at conversion. Model both. - **MFN (most-favored-nation)**: a SAFE holder gets the best terms you later grant. Stacking MFN SAFEs can quietly ratchet up everyone's terms. ## Choosing - **SAFE** when: speed matters, you are pre/early-seed, you have strong investor demand and want to avoid setting a price too early. - **Priced round** when: you have a lead writing a large check, you want a clean cap table and a real valuation, or stacked SAFEs are getting hard to model. Watch the **stacking trap**: several uncapped or high-cap SAFEs feel painless until they all convert at the Series A and reveal you sold more than you thought. Always model the fully-converted table before signing the next one. Practitioner red lines: keep cumulative SAFE dilution before the priced round under roughly 20-25%; if the stack is heading past that, or a single round would sell more than ~25%, it is time to price the round instead of adding another SAFE. ## Worked example: the stack that ate 31% A founder raises three post-money SAFEs over 18 months, each feeling small: - $500k on a $5M post-money cap โ†’ 10.0% - $750k on a $7.5M cap โ†’ 10.0% - $1M on a $9M cap โ†’ 11.1% No shares have moved, so the cap table still "looks" clean. But 31.1% of the company is already spoken for. At the Series A the lead takes 20% and requires a 10% option pool - carved out pre-money, so it also comes from the founders. Fully converted, the founders wake up below 45% before the B, having believed they were "only giving up 10% at a time." The fix, applied in time: after the second SAFE (20% committed), the correct move was to price the third raise. A $1M-plus check with 20% already stacked is exactly the "stacked SAFEs are getting hard to model" trigger above - and a priced round would have set the pool with the investors sharing the dilution conversation openly, instead of it landing silently on the founders. ## Anti-patterns - Raising on a cap so low it craters your ownership at conversion. - Treating SAFE money as non-dilutive because no shares moved yet. - Stacking SAFEs without modeling combined conversion - especially past the ~20-25% cumulative line. - A convertible note whose maturity hits before your next round. ## Quality bar - Every SAFE in the stack is converted in the model - none treated as "not real dilution yet." - The fully-converted table includes the next round's option pool, carved where the term sheet actually carves it. - Both cap and discount conversion are modeled, with the investor taking the better of the two. - The recommendation names specific terms to seek and resist, not just an instrument. - Founder ownership after the modeled priced round is stated as a single number. ## Deliverable A recommendation (SAFE / note / priced) with the reasoning for this stage, the specific terms to seek and to resist (cap, discount, MFN), and a fully-converted dilution model for the chosen path. Carry terms into [[term-sheet-negotiation]].