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Here’s an example of how a post-money fixed percentage SAFE converts to equity:

SOSV invests $275,000 into ABC Inc. on 1st of June 2024 using a post-money SAFE.

The SAFE provides that immediately prior to an “Equity Financing” (as defined in the SAFE and explained below in this FAQ) the $275,000 investment will convert to x% of the “Company Capitalisation”.

The definition of Company Capitalisation in a post-money SAFE usually looks something like this:

“Company Capitalization” is calculated immediately prior to the Equity Financing and (without double counting, in each case calculated on an as-converted to Common Stock basis):

  • Includes all shares of Capital Stock issued and outstanding;
  • Includes all Converting Securities;
  • Includes all (i) issued and outstanding Options and (ii) Promised Options; and (iii) an Unissued Option Pool of at least 10%;
  • Excludes, notwithstanding the foregoing, any increase to the Unissued Option Pool in connection with the Equity Financing.

This means that all shares (common and preferred) issued and outstanding, all convertible instruments issued, and all options (i.e. the ESOP) are included in the calculation of SOSV’s post-money equity holding. Please note this is just an example for discussion purposes only – the definition of Company Capitalization may vary and change over time from contract to contract.