Company setup and early instruments
Choosing a SAFE cap
A cap is an ownership sale. Size the dollars against the cap, stay well under it, and stop when you hit your band.
Caps are negotiated ownership sales dressed as valuations. Talking about a "$10M cap" without saying how many dollars you will raise against it is incomplete. Two founders both "raising on a $10M SAFE" can end in very different places.
The big idea
A jar with a printed "10%" label is the picture. Every dollar you drop in fills that jar. Fill it to the brim ($5M into a $5M cap) and you have sold the whole company on paper. The analogy breaks because later SAFEs at other caps add more jars, all taken from the founders — see post-money stacking.
Implied post-money cap ≈ Total SAFE dollars / Target ownership sold
Example: raise $1.5M selling ~15% → cap ≈ 1.5M / 0.15 = $10M postIf seed companies in your market and stage are effectively selling roughly 10–20% on a SAFE round (orders of magnitude as of 2025–2026 — markets move), back the cap out from that band, not from a vanity headline.
Walking through two $10M caps
Founder A raises $500k at a $10M post cap → 0.5 / 10 = 5%.
Founder B raises $2.5M at the same $10M post cap → 2.5 / 10 = 25%.
Same "cap," very different companies sold. A hard constraint: if you raise an amount approaching the cap itself, ownership becomes absurd. Raising $5M on a $5M post-money cap implies 100% — nonsense ownership. Stay well under the cap in aggregate.
Before you sign, sum post-money SAFE percentages (investment / cap each). Pick a target ownership band (for example "sell about 15% on this seed") and stop when you hit it, even if more angels want yesterday's cap.
Trade-off
Post-money SAFEs optimize for investor clarity and speed. The cost is founder discipline: every new SAFE at a low cap is a visible, additive sale of the company. If you need many small checks without stacking ownership so bluntly, raise less, raise at higher caps, or go to a priced round.
Common mistakes
- Raising too close to the cap.
Investment / Capgets absurd; social trust breaks before the arithmetic does. - Quoting the cap and hiding the dollars. Ownership is dollars over cap, summed.
- Keeping the round open after you hit the band. Extra angels at the old cap are extra founder dilution.
Check yourself
You want to raise $1.5M and sell about 15%. What post-money cap does that imply?
$10M. $1.5M / 0.15 = $10M.
Why is $5M on a $5M post-money cap a problem?
It implies 100% ownership for SAFE holders — the math, and the deal, break.
Key takeaways
- Cap without dollars is an incomplete sentence; ownership is
sum(investment / cap). - Back the cap out from the % you are willing to sell.
- Stay well under the cap in aggregate, and stop at your band.
Further learning
Convert the stack with real share counts in SAFE conversion math.
Related
SAFEs
The post-money SAFE as a right to future equity — valuation caps, discounts, MFN, pro-rata side letters and the ownership math founders must run before signing.
Post-money SAFEs
Ownership at the cap is investment divided by cap, and later SAFEs dilute founders rather than earlier SAFE holders.
SAFE conversion math
Stack post-money SAFEs, convert them in a priced round with an option pool, and work share counts and ownership before and after Series A.