How does the SAFE conversion calc work?

Short answer

A SAFE converts at the lower of two prices — whichever gives the holder more shares:

• Discount price = round price × (1 − discount_rate). E.g. 20% discount on a £2.50 round = £2.00/share for the SAFE.
• Cap price = valuation_cap ÷ outstanding shares pre-round. E.g. £5M cap with 1,000,000 shares outstanding = £5.00/share for the SAFE.

Whichever is lower wins (more shares for the SAFE).

Worked example

SAFE: £250K, 20% discount, £5M cap. Series A: £2.50/share, £10M pre-money. Outstanding shares before round: 1,000,000.

Discount price: £2.50 × (1 − 0.20) = £2.00 Cap price: £5,000,000 / 1,000,000 = £5.00

Discount is lower (£2.00 vs £5.00) → SAFE converts at £2.00/share.

Converted shares = £250,000 / £2.00 = 125,000 shares.

When the cap wins

If the round price is high enough that the discount stops being attractive, the cap kicks in. Same SAFE but now:

Series A: £8.00/share, £40M pre-money.

Discount: £8.00 × 0.80 = £6.40 Cap: £5,000,000 / 1,000,000 = £5.00

Cap is lower → conversion at £5.00/share = 50,000 shares.

The SAFE holder gets fewer shares at this higher valuation than they would've at the lower one — but their percentage of the cap table is better, which is the SAFE's point.

When only one is set

• Only discount, no cap: SAFE converts at discounted round price. Caps are usually set for downside protection — if there's no cap, the SAFE doesn't care how high the valuation goes.
• Only cap, no discount: SAFE converts at cap price ÷ outstanding shares. Common for "uncapped notes" with a cap as the only protection.
• Neither set: SAFE converts at the round price (no preferential treatment). Almost never seen in practice.

What Blankitt shows you

The Preview conversion button on the Convert modal shows:

• Price-with-discount
• Price-at-cap (computed against the live outstanding-shares count)
• The effective conversion price (lower of the two)
• The basis for the choice (discount or cap)
• The converted shares count

Use it to sanity-check before clicking Convert.

CLN-specific note

CLNs (Convertible Loan Notes) accrue interest. Blankitt computes simple interest from issue_date to conversion_date and adds it to the principal before conversion. So a £100K CLN at 8% interest for 18 months converts £100K × (1 + 0.08 × 1.5) = £112K worth of shares at the effective conversion price.