Question 1

What is a cap table?

Accepted Answer

A capitalization table — the cap table — is the source-of-truth ledger that lists every shareholder of a private company along with how many shares they own and what percentage of the company that represents. It tracks founders, employee option pools, SAFE holders, and priced-round investors as they layer in over time. Every fundraising round modifies the cap table; founder dilution is the difference between your starting ownership percentage and your ownership after each new round adds shares. Reference: Brad Feld and Jason Mendelson, Venture Deals (4th ed.).

Question 2

How does a SAFE convert in a priced round?

Accepted Answer

When the priced round closes (the conversion trigger), the SAFE converts at the LESSER of two prices: the cap-price (valuation cap ÷ pre-priced share count) or the discount-price (priced-round price × (1 − discount %)). Whichever produces fewer dollars per share — the better deal for the SAFE holder — wins. If the cap is far below the priced-round valuation, the cap wins and the SAFE holder gets a much bigger stake than they'd get at the priced price. If the cap is above the priced-round valuation, the discount wins. If the cap equals the priced pre-money exactly with no discount, the SAFE converts at the priced price (no benefit, no penalty). This calculator implements the YC 2018 post-money SAFE convention. Source: Y Combinator SAFE primer (ycombinator.com/documents).

Question 3

Why is the option pool so important to dilution math?

Accepted Answer

Because the option pool comes out of pre-money — meaning founders pay for it via dilution, not the new investors. When a term sheet says "10% post-closing option pool," what that actually means is: size the pool such that, after the priced round closes, options equal 10% of the cap table — and allocate it BEFORE the new investors come in. The pool refresh formula: pool_shares = (target % × pre-priced total) ÷ (1 − target %). On a 10M-founder-share base with a 10% target, that's an extra 1.11M shares of dilution that founders alone bear. This is the famous "option pool shuffle" — investors negotiate larger pools (12-15%) precisely because it reduces THEIR effective price-per-share. Source: Brad Feld + Jason Mendelson, Venture Deals.

Question 4

What's the difference between pre-money and post-money valuation?

Accepted Answer

Pre-money valuation is the company's value BEFORE the new round's cash hits the balance sheet; post-money is the value AFTER. Post-money = pre-money + amount raised. So a $5M raise at $20M pre-money is a $25M post-money. The priced-round investors own (amount raised ÷ post-money valuation) of the company on a fully-diluted basis — in this example, $5M ÷ $25M = 20%. Founders almost always negotiate against pre-money (the smaller, more flattering number); investors think in post-money (the cleaner ownership math). When someone says "$20M valuation" without qualification, ask which one — it's a $5M difference per round.

Question 5

What does "post-money SAFE" mean?

Accepted Answer

In 2018, Y Combinator updated the SAFE template to use a post-money valuation cap instead of a pre-money one. Under the post-money convention, the SAFE holder's ownership percentage at conversion is approximately (SAFE amount ÷ valuation cap) of the company on a post-money basis (excluding new priced-round investors). The benefit: dilution math is cleaner because the SAFE holder's stake is locked in by the cap — additional SAFEs, option pool refreshes, and priced-round prices don't dilute them away from that percentage. The cost: founders bear MORE dilution than they would under the pre-money SAFE, because pool refreshes and additional SAFEs all dilute founders alone. This calculator uses the post-money convention. Source: ycombinator.com/documents.

Question 6

How does anti-dilution protection work?

Accepted Answer

Anti-dilution protects priced-round investors when the company later raises a DOWN round (lower valuation than their entry round). Two flavors: (1) Weighted-average broad-based — the standard, used in 95%+ of venture deals. The investor's effective conversion price is reset using a formula that weights the dilutive impact of the new round against the existing shares outstanding. The protection is partial — investors absorb some of the down-round pain alongside founders. (2) Full-ratchet — predatory and rare. The investor's conversion price resets to the new round's price as if they'd invested at the lower valuation, fully insulating them from the down round. Founders should treat full-ratchet as a deal-breaker; weighted-average broad-based is the YC-default and the right benchmark. This calculator's v1 doesn't simulate down-round anti-dilution adjustments — that's a v2 feature. Source: National Venture Capital Association model documents.

Question 7

Should I take a SAFE or a priced round?

Accepted Answer

Three signals favor a SAFE: speed (a SAFE closes in days; a priced round takes weeks-to-months and $30-50K in legal fees), small check sizes ($25-500K), and high uncertainty (you don't yet know the right valuation, or you want to lock in a great cap before traction reprices you upward). Three signals favor a priced round: large check size ($1.5M+), institutional lead investor (they want a board seat and information rights, which SAFEs don't grant), or you're already at the threshold where stacking SAFEs creates messy conversion math at the eventual priced round. The hybrid: most YC-stage companies take SAFEs from angels + small funds, then do a priced Series A once the round is large enough to justify the legal cost.

Question 8

What's a typical option pool size?

Accepted Answer

10-15% post-money is the YC-default for most early-stage companies; 15-20% is common when the team is heavily technical and many key hires are still pre-equity. Investors will push for the high end of the range because every percentage point of pool comes out of YOUR pre-money — it's roughly a 10:1 lever on founder dilution. The defensible negotiation: build a hiring plan for the next 18 months, attach equity grants to each hire, sum them, and use that as the pool size. If the math says 8%, don't accept 15% just because the term sheet template offers it. Sources: Carta dilution data + Brad Feld + Jason Mendelson, Venture Deals.

Holder	Shares	%
Founders	10,000,000	90.00%
Option pool	1,111,111	10.00%
Total	11,111,111	100%

Holder	Shares	%
Founders	10,000,000	81.82%
Option pool	1,111,111	9.09%
SAFE	1,111,111	9.09%
Total	12,222,222	100%

Holder	Shares	%
Founders	10,000,000	65.45%
Option pool	1,111,111	7.27%
SAFE	1,111,111	7.27%
Priced investors	3,055,556	20.00%
Total	15,277,778	100%

Cap Table + Dilution Calculator

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Worked example — the YC-default scenario

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