SAFE (Future Equity)

Definition

A SAFE is an instrument that typically converts into equity at a future priced round. It often includes a valuation cap, a discount, or both to reward early investors.

Example

A $500k SAFE with an $8M cap converts at the cap if the priced round is above $8M.

How to use it

• Conversion price is often the better (lower price) of cap vs discount (terms vary).
• Model conversion using fully diluted shares to avoid underestimating dilution.
• Understand post-money vs pre-money SAFE mechanics before modeling dilution.

Common mistakes

• Ignoring post-money SAFE mechanics and MFN clauses (terms vary).
• Treating simplified math as legal truth without reconciling documents and cap table.
• Forgetting multiple SAFEs stack and compound dilution.

Why this matters

This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.

Practical checklist

• Write a 1-line definition for "SAFE (Future Equity)" that your team will use consistently.
• Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
• Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
• Use a calculator that references this term (e.g., SAFE Conversion Calculator) to sanity-check assumptions.
• Read the related guide (e.g., SAFE: what it is, valuation cap vs discount, and conversion basics) for context and common pitfalls.

Where to use this on MetricKit