How Much Equity Do Founders Part With in SAFE Rounds

Here's how much equity founders are parting with in early SAFE rounds.

To be clear, they don't actually sell this equity until the next priced fundraise (which is the beauty of SAFEs). But if the SAFE is post-money, then it's easy to do some simple math to find out how much equity the SAFE investor is likely to receive upon the following fundraise.

Data comes from 15,000+ SAFEs signed by companies before their first priced round in the previous 12 months.

A little explanation on the chart - the top row is the median dilution for founders in a SAFE round of a given size. Example: founders who raise $500K-$999K on SAFEs typically sell 9% of the business.

The teal heatmap shows the distribution of implied dilution for each round size. Each SAFE round is unique, but this distribution should allow founders to see if their implied dilution is well within market or an outlier.

To the data:

𝗦𝗔𝗙𝗘 𝗿𝗼𝘂𝗻𝗱 𝗼𝗳 𝘂𝗻𝗱𝗲𝗿 $𝟮𝟱𝟬𝗞

• Only 1.5% implied dilution (I think this is low due to the timing of the analysis - many SAFE rounds currently under $250K on the platform will end up higher than that as they continue to raise)

𝗦𝗔𝗙𝗘 𝗿𝗼𝘂𝗻𝗱: $𝟮𝟱𝟬𝗞-$𝟰𝟵𝟵𝗞

• Implied dilution of 5%

• 9 in 10 rounds of this size come in less than 10% dilution

𝗦𝗔𝗙𝗘 𝗿𝗼𝘂𝗻𝗱: $𝟱𝟬𝟬𝗞-$𝟵𝟵𝟵𝗞

• Sweet spot right around 9% dilution

• Majority under 15%

$𝟭𝗠-$𝟮.𝟰𝗠

• 15% expected dilution

• This is in the lower end of the priced seed round range and the distribution is very wide

$𝟮.𝟱𝗠-$𝟰.𝟵𝗠

• 21.6% median dilution

• This matches very closely the expected dilution from a priced seed round. Looks like the market is acting pretty rationally (you can raise on SAFEs or priced for the same economics)

$𝟱𝗠 𝗦𝗔𝗙𝗘 𝗿𝗼𝘂𝗻𝗱

• 25% dilution here - major funding for SAFEs

Notice we didn't talk at all about valuation caps! They are the natural output from dollars raised and implied dilution.

But if you want to know the latest valuation cap figures (and discounts, and side letter trends, and so much more) - join me and Haley Bryant from Hustle Fund at 10am PT today! We'll be digging into all things pre-seed. Link to events in comments below or head over to carta dot com / events.

Here's to raising SAFEly!

#cartadata #dilution #SAFEs #founders #preseed