Hi folks, at which round is the SAFE cap converted into equity

[loujohn]

As you know SAFE cap is converted into equity when you raise money so my question is at which round does that happen because the higher you raise the lower the equity the investor gets. Example there is YC 375k, if you raise series A at 1 mil valuation that means YC gets 37.5% and if you raise series B at 10 mil val it’s 3.75%.
thanks in advance

 

[mrssnowqueen1]

@loujohn Note that YC's $375k SAFE will adopt the most favorable terms from amongst all the other SAFE investors. So if another SAFE has any valuation cap in its terms, YC will convert based on that same cap.

 

[loujohn]

@mrssnowqueen1 I see. Thanks a lot

 

[weeunc]

@loujohn Whatever round is priced (not a convertible instrument)

 

[loujohn]

@weeunc So series A probably

 

[lepows]

@loujohn Series A

 

[i_believe]

@lepows Does not need to be series A, but whatever real “equity” round that actually involve the filling for equity and distribution of equity to shareholders.
For us it was our Seed Round.

 

[mrssnowqueen1]

@i_believe Oh, interesting. Does that mean founders don't start vesting until the "equity round" when the SAFEs convert?

 

[i_believe]

@mrssnowqueen1 Vesting has nothing to do with SAFEs. When you incorporate a c-corp in Delaware, you create common shares, and the founders buy those shares and set up a vesting program. The equity round will involve creating new shares (preferred).
I used clerky.com for the incorporation. It is way cheaper than using lawyers to draft the docs, and they use standard templates.

 

[mrssnowqueen1]

@i_believe I appreciate the clarification. Thank you!

 

[loujohn]

@lepows Thanks a lot