Numerical Example: SAFE, cap, no discount

Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000.

The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is 11,000,000 shares.

The company will issue and sell 1,100,110 shares of Series A Preferred at $0.909 per share to the new investors. The company will issue and sell 220,022 shares of Series A-1 Preferred to the safe holder, at $0.4545 per share.

In the safe, the Series A Preferred is referred to as “Standard Preferred Stock” and the Series A-1 Preferred is referred to as “Safe Preferred Stock.” The analysis below sets forth a comparison between the Standard Preferred and the Safe Preferred, as each would be described in the company’s certificate of incorporation:

Liquidation preference on a per share basis: - Standard Preferred Stock: $0.90 - SAFE Preferred Stock: $0.4545

Aggregate payout in a change of control transaction (each series pari passu with the other): - Standard Preferred Stock: $1,000,000 - SAFE Preferred Stock: $100,000

Conversion price and original issuance price at the time of the Series A Preferred financing: - Standard Preferred stock: $0.90 (initially converts into 1,100,110 shares of common stock) - SAFE Preferred Stock: $0.4545 (initially converts into 220,022 shares of common stock)

Dividend Rate per share (based on an 8% dividend): - Standard Preferred stock: $0.072 - SAFE Preferred Stock: $0.036

Source: Y Combinator SAFE Primer