# Convertible Note and SAFE Model Track SAFE and note conversions with valuation caps, discounts, and pro forma cap tables at each funding round. Model conversion outcomes under different Series A prices, maturity events, and acquisition scenarios to understand dilution before signing. - Canonical: https://finamodel.com/templates/convertible-safe-model - Excel download: https://finamodel.com/templates/convertible-safe.xlsx - Category: Corporate Finance - Model type: Valuation - Difficulty: Intermediate - Audiences: Founders & operators, Investors & analysts, Founders, Seed investors, VCs, Corporate development - Tags: Seed, Fundraising, Cap table, SAFE ## Overview This convertible note and SAFE model projects early-stage company funding rounds and tracks how convertible instruments (SAFEs and convertible notes) convert into equity at each priced round. It models the cap table evolution across seed, Series A, Series B funding, showing dilution to founders and early investors as new capital is raised and convertibles convert at the priced round valuation. The model calculates IRR and MOIC for each investor cohort based on their entry valuation, conversion terms (valuation cap, discount rate), and eventual exit valuation. The model includes a sources-and-uses statement for each funding round; a pro forma cap table (fully diluted) at each closing showing share counts and ownership percentages; a trigger analysis showing when conversion occurs (priced round, time-based maturity, acquisition); and conversion math comparing the cap-capped vs. discount-capped valuation for each instrument. A returns waterfall prioritises payment on exit: safe holders and note holders convert into preferred stock, which then receives preferred return before common equity distribution. Sensitivity tables show how holder returns vary with exit valuation and pre-seed cap assumptions. This model is used by founders and startups planning capital raises and understanding future dilution; early-stage investors and syndicates evaluating SAFE and convertible note terms; and venture debt providers modelling conversion probability and equity upside. It clarifies the complex conversion mechanics that often confuse entrepreneurs evaluating term sheets. ## What's included - SAFE and convertible note terms: discount rate, valuation cap, maturity - Conversion trigger modeling: priced round, maturity, and acquisition - Equity round pricing and pre-money valuation - Post-conversion cap table and dilution waterfall - Holder economics and IRR by funding scenario - Conversion trigger modeling (priced round, time, acquisition) ## Convertible Note and SAFE Model: How the Template Works This convertible note and SAFE model template helps founders and investors see how different funding instruments convert into equity and affect ownership. It tracks SAFEs, a convertible note, option pool changes, and a Series A round, then shows dilution and exit proceeds across several scenarios. The model focuses on funding stages, not operating forecasts. ### Key Operating Drivers The model starts with founder shares, an option pool, and two SAFEs plus one convertible note. For each SAFE, you choose pre-money or post-money treatment; post-money ownership uses investment divided by effective cap, with supporting share calculations. - SAFE 1 has an MFN option that selects the lower cap among SAFEs. SAFE 2 can choose better cap or discount terms and compares its cap with the discounted Series A post-money valuation. - The note accrues simple annual interest over an input number of months and converts at the lower of cap or discount share price when its outcome is set to Convert. Other note outcomes include repay, extend, hold below qualified financing amount, and change of control. Series A inputs include valuation, price, preference type, participation cap, and pro-rata controls that add top-up shares. ### Calculation Flow Instrument terms from the Assumptions tab feed the Instrument_Schedule, which calculates effective SAFE terms, accrued note interest, conversion price, and shares. Those results populate the Cap_Table, showing ownership stages from pre-SAFE through post-Series-B. - The post-Series-A capitalisation then drives the Waterfall, where each of six exit scenarios distributes proceeds. Exit values are input as multiples of Series A post-money valuation or as positive dollar overrides. - Series A receives a non-participating, full-participating, or capped-participating payout, limited by available proceeds. Remaining proceeds are allocated across other post-Series-A holders. - Returns calculate MOIC as distributions divided by original investment. Founder_Dilution shows ownership by stage and founder exit proceeds. Sensitivity grids vary Series A valuation and investment size to test founder ownership and SAFE 1 MOIC outcomes. ### Outputs and Visuals The Dashboard summarises capital raised, Series A valuation and price, ownership by stage, and exit return charts. The Instrument_Schedule details each instrument's conversion outcome and share count. - The Cap_Table presents pre-SAFE, post-conversion, post-Series-A, and post-Series-B shares and ownership percentages, with supporting conversion and option-pool calculations. The Waterfall and Returns tabs show six exit distributions, investor MOIC, and effective prices. - Founder_Dilution reports ownership dilution by stage and founder exit proceeds. Sensitivity grids display how founder ownership and SAFE 1 MOIC change with Series A valuation and investment size. Checks validate ownership, conversion, distribution, SAFE ownership, and option-pool tests. All outputs are based on the documented inputs and calculations. ### Practical Use and Boundaries Use this model to compare conversion outcomes under different Series A prices, maturity events, and acquisition scenarios, so you can understand potential dilution before signing. It suits founders and investors evaluating funding stages. - Series B is a dilution stub; exit waterfall and returns use post-Series-A ownership, not post-Series-B capitalisation. Only Series A has an explicit preference stack, so it does not represent full legal preferences, multiple seniority tiers, or automatic contractual compliance. - The change-of-control payoff is a reference calculation, not a complete pre-Series-A liquidation waterfall. Repay, extend, and hold outcomes suppress note conversion but do not create a debt cash-flow repayment schedule. - Sensitivity grids embed simplified calculations and require an Excel version supporting LET. Zero exit overrides are ignored. - Several division guards return zero, so a zero result does not confirm valid inputs. Sample investor names, valuations, and rates are illustrative, not market evidence. The public download is a values-only preview; it does not contain live formulas or automatically recalculate. ## Trigger scenario modeling across outcomes Model conversion outcomes under different Series A prices, maturity events, or acquisition scenarios to understand investor economics before the round closes. ## Cap table progression through rounds Track founder, advisor, employee, and investor ownership through multiple rounds including SAFE and note conversions at each step. ## SAFE terms versus straight equity comparison Show how valuation cap and discount affect investor returns relative to straight equity at different exit prices so founders can negotiate from a position of clarity. ## Trigger scenario modeling across outcomes Model conversion outcomes under different Series A prices, maturity events, or acquisition scenarios to understand investor economics before the round closes. ## Cap table progression through rounds Track founder, advisor, employee, and investor ownership through multiple rounds including SAFE and note conversions at each step. ## SAFE terms versus straight equity comparison Show how valuation cap and discount affect investor returns relative to straight equity at different exit prices so founders can negotiate from a position of clarity. ## Features - **Trigger scenario modeling:** Model conversion outcomes under different Series A prices, maturity, or M&A scenarios. - **Cap table progression:** Track founder, advisor, employee, and investor stakes through multiple rounds with SAFE and note conversions. - **Economics comparison:** Show how SAFE terms (valuation cap, discount) affect investor returns vs. straight equity at different exit prices. ## Use cases - **Pre-seed and seed fundraising:** Use the model to explain SAFE terms to investors and model different valuation cap scenarios. - **Cap table planning:** Forecast ownership stakes through multiple funding rounds and plan for employee option pool refresh. - **M&A exit planning:** Model payouts for SAFE holders at different acquisition prices and understand downside scenarios. ## Frequently asked questions ### What is a SAFE? A SAFE (Simple Agreement for Future Equity) is a convertible instrument that converts at a Series A or qualifying event, typically with a valuation cap and an optional discount rate. ### How does the valuation cap work? The valuation cap sets a maximum effective pre-money valuation at conversion. A lower cap benefits the investor by locking in a lower implied price. ### What is the difference between a SAFE and a convertible note? A convertible note is debt with a maturity date and interest that converts into equity. A SAFE is not debt and has no maturity or interest, making it simpler for early-stage deals. ### What happens if the company is acquired before Series A? The model covers multiple payoff scenarios: fully diluted basis conversion, preferred equivalence, or cash multiples, so you can negotiate acquisition terms with full visibility. ### Who uses SAFE and convertible note models? Founders, seed investors, VCs, and corporate development teams use them for pre-seed fundraising, cap table planning, and M&A exit scenario analysis. ## Related templates - [Cap Table Management Model](https://finamodel.com/templates/cap-table-model) - [Bridge Round Financing Model](https://finamodel.com/templates/bridge-round-financing-model) - [Venture Capital Fund Model](https://finamodel.com/templates/venture-capital-model)