New Standard Deal
Great that YC is simplifying their deal and making it more standard and easier for founders to understand. Also great that they&#x27;re switching the standard SAFE to be a post-money SAFE, as this will eliminate a lot of confusion around dilution that resulted from the complicated math of the old standard SAFE.<p>Interestingly, unless I&#x27;m understanding this incorrectly, this change might mean a worse deal for founders going through YC. As the post mentions, when calculating the dilution taken from a post-money SAFE, all other money raised on convertible instruments before an equity raise are excluded.<p>Functionally, what this means is that while investors on standard SAFEs are diluted by other SAFE investors before an equity round (as are all common holders), investors on post-money SAFEs are not diluted by other investors on SAFEs before an equity round.<p>So unless I&#x27;m misunderstanding this, I believe this means that YC (which was previously a common holder like the founders) will no longer be diluted by the money founders raise on convertible notes or SAFEs before an equity round, whereas before they were diluted by that money.<p>To demonstrate this, I modeled out a scenario where a company goes through YC, raises $2m on a $10m cap pre-money SAFE after demo day, and then raises a $10m Series A equity round at a $30m pre-money valuation. Scenario A shows the old YC deal where YC has 7% common, and Scenario B shows the new YC deal where YC invests on a post-money SAFE<p>Scenario A: <a href="http:&#x2F;&#x2F;angelcalc.com&#x2F;model?mod=802&amp;dispShare=0e55666a4ad822e0e34299df3591d979" rel="nofollow">http:&#x2F;&#x2F;angelcalc.com&#x2F;model?mod=802&amp;dispShare=0e55666a4ad822e...</a><p>Scenario B: <a href="http:&#x2F;&#x2F;angelcalc.com&#x2F;model?mod=803&amp;dispShare=8a50bae297807da9e97722a0b3fd8f27" rel="nofollow">http:&#x2F;&#x2F;angelcalc.com&#x2F;model?mod=803&amp;dispShare=8a50bae297807da...</a><p>Note: click &quot;Model&quot; to see the results. In Scenario A, YC is listed as &quot;YC&quot; and in Scenario B YC is listed as &quot;Post SAFE-0 (2.1mm)&quot;. As you can see YC ends up with 1.575% more equity in Scenario B.<p>The simplicity of this change is great but it&#x27;s important that founders understand the downside as well. Team YC, if I&#x27;m misunderstanding this, please let me know.