SAFEs, notes and rounds

A SAFE or convertible note is money invested now that turns into shares at your next priced round. FounderSync tracks those instruments, works out how they convert, and records the round itself. The documents you signed govern the real terms, so check them with a lawyer.

Recording SAFEs and notes#

On SAFEs & notes, choose Add SAFE or note. Pick the holder from your stakeholders, then:

• Instrument: Post-money SAFE, Pre-money SAFE or Convertible note.
• Amount invested, above zero.
• Valuation cap and Discount (0 up to, but not including, 100%), each optional.
• Date signed.
• For notes, an Interest rate (annual, simple) and a Maturity date after the signing date. For SAFEs, a Most favored nation switch.

An instrument is outstanding until a round converts it. You can cancel an outstanding one and reinstate it later. Once converted, it is locked and cannot be edited or deleted.

How conversion is calculated#

Notes add simple interest, principal times the annual rate times days over 365, from the signing date to the round's closing date. SAFEs add none.

The conversion price is the lower of two prices, or the round price when there is neither a cap nor a discount:

• Cap price. For a post-money SAFE, the cap divided by the company's fully diluted shares including every converting instrument, so later SAFEs dilute existing holders and not each other. For a pre-money SAFE or a note, the cap divided by fully diluted shares before the round.
• Discount price. The round price times one minus the discount.

Shares issued are the converting amount divided by the conversion price, rounded down.

Priced rounds#

The round price is the pre-money valuation divided by the pre-money fully diluted shares, which include the pool top-up and every converting instrument. That is why those items dilute existing holders and not the new investors. New investors receive their money divided by the price, rounded down. The price is rounded to 4 decimals. An optional pool target tops the unissued pool up to a percentage of the post-round company (the server accepts 0 to 60%), rounded up to whole shares.

These depend on each other, so the engine solves them together by iteration. If they do not settle on one price, the modeler warns you and the server refuses to close the round.

Preview and close#

Build the round on the Round modeler. Your browser previews it using the same calculation file as the server, and nothing is saved. Close round opens a dialog where you name the round and choose the share class it issues: an existing preferred class, or a new one with a name, liquidation preference, participation and seniority, priced at the round price.

Closing calls the captable-round function with action close. It re-reads your live cap table, checks the request and recomputes everything. Among other checks, each selected instrument must still be outstanding, investor amounts must add up to the new money, and each investor must be able to buy at least one share. It then makes one database call that writes everything together or nothing at all:

• the round record, with price, valuation and fully diluted counts before and after;
• each selected SAFE or note marked converted, with shares issued to its holder at the conversion price;
• shares issued to each new investor;
• the pool top-up, added to your first option plan, or to a new Equity Incentive Plan if you have none.

If someone changed the cap table after you modeled the round, the server's price can differ from your preview, and the confirmation says so. A new share class is created before the server call, so if closing fails, that class remains and is reused on your retry. After a close, FounderSync checks for a "round closed" agreement review and opens the Rounds page, which lists each closed round with its price, amount raised, valuations, dilution, pool top-up, investors and conversions. Rounds can only be added by closing a modeled round.