The Downside to Post-Money SAFEs for Founders

If you are a startup founder raising capital in 2025, chances are you have used or are using a post-money SAFE. They have become the standard tool for early-stage financing for good reason. Post-money SAFEs are standardized, fast, clean, and familiar to investors. They offer clear dilution mechanics and a straightforward path to close.

However, there is a catch. While post-money SAFEs simplify many things, they come with a structural reality that not enough founders fully appreciate: Each post-money SAFE dilutes only the founders and existing shareholders. So what happens when you raise multiple SAFE rounds over time? It’s you, the founder, who bears the brunt of it.

Here is a graphic showing the difference between how the earlier pre-money SAFE worked as compared to a post-money SAFE. The first bar shows a pre-money SAFE with a $5 million cap and the second bar shows a post money SAFE with a $5 million cap. Each scenario assumes $1 million raised in a SAFE and a conversion at the cap.

Nothing wrong there. The “post-money” name says it all. The problem comes when you start adding more SAFEs. Adding more $5 million post-money SAFEs shrinks the value of the blue section of the bar. $2 million in SAFEs, for example, would shrink the existing shareholders and optionholders to a $3 million value. Under the old pre-money SAFEs, the founder portion was fixed at the pre-money value and adding more SAFEs did not change that.

By the way, this effect is by design and is one of the primary reasons for the shift to post-money SAFEs.

This is not to suggest founders should avoid post-money SAFEs or that they are bad. They are the market standard for a reason. We use them with our clients every day and you are likely to get push back if you roll out a pre-money SAFE to sophisticated investors these days. Having said that, if you are a founder, you should:

1) Understand the impact of stacking SAFEs, especially if you are doing multiple small rounds over time.

2) Model out your ownership after conversion, not just once, but as each new batch of SAFEs is added.

Early-stage fundraising does not always unfold in a perfectly sequenced, single-round format. Many founders raise incrementally to extend runway, hit milestones, or keep momentum alive. There’s nothing wrong with that if that’s what you have to do. However, if you do have flexibility, this is one area where it pays to slow down and plan ahead.

If you would like help modeling your SAFE stack or reviewing your next raise, we’re always happy to chat.