YC SAFE Dilution & Delaware Share Headroom Calculator
Calculate post-money investor ownership, uncover authorized share shortfalls requiring a Delaware Certificate of Amendment ($214 fee), and safeguard against surprise franchise tax increases.
Share Authorization Shortfall Detected: Delaware Charter Amendment Required
Issuing shares upon SAFE conversion requires 11,111,111 total shares, but your certificate of incorporation only authorizes 10,000,000 shares (a deficit of 1,111,111 shares). You must file a Certificate of Amendment with the Delaware Division of Corporations ($214 state filing fee) to increase authorized shares to at least 14,000,000 shares.
SAFE & Equity Parameters
YC StandardFrom Certificate of Incorporation (e.g. 10,000,000).
Delaware Franchise Tax Projection Upon Share Increase
State default bill increases by +$34,000!
Maintaining $0.00001 par value keeps true liability capped at minimal levels.
Legal Execution Steps for Financing
- Board Approval: Board of Directors must approve SAFE agreements and any reservation of authorized shares.
- Charter Amendment Timing: Usually executed immediately prior to or simultaneously with Series A preferred stock closing.
- Par Value Safeguard: Ensure the amendment maintains par value at $0.00001 to avoid the state tax trap.
What is a post-money SAFE?
A SAFE (Simple Agreement for Future Equity) is an investment contract, published by Y Combinator, in which an investor pays now and receives preferred shares at the company’s next priced equity round. It is not debt: there is no interest and no maturity date.
The post-money version, introduced in 2018, fixes the investor’s ownership at signing: ownership equals the investment divided by the post-money valuation cap. A $500,000 SAFE on a $10,000,000 post-money cap buys 5% of the company as measured just before the priced round’s new money.
How does a SAFE convert into shares?
At the priced round, the SAFE converts at the lower of the cap price (valuation cap divided by the company capitalization) and, if the SAFE has one, the discounted round price. The investor gets the investment divided by that price, in shares of the new preferred series.
Post-money SAFE holders are not diluted by other SAFEs; the founders absorb that dilution. All SAFE holders are then diluted by the new money in the priced round alongside everyone else.
Why do SAFEs matter for Delaware franchise tax?
Converting SAFEs issues new shares, and the certificate of incorporation must authorize enough shares first (8 Del. C. § 161). If the company has to increase authorized shares, the Authorized Shares Method tax rises by $85 for each additional 10,000 shares.
Under the Assumed Par Value Capital Method, issuing more shares lowers the assumed par per share, so a larger issued-share count usually keeps the tax near the $400 minimum. Model the conversion before the round closes so the charter amendment and the franchise tax both hold no surprises.