What's a SAFE valuation cap?

Author:
Peter Walker

Read time:
1 minute

Published date:
November 16, 2023

It's the number one question I get whenever speaking with a group of early founders: what should the valuation cap be on my upcoming SAFE fundraise?

And I can see why it's hard to figure out! You've got angels in smaller markets insisting that anything above a $3M valuation cap is silly in today's market. You've got YC founders raising on $20M valuation caps as a matter of course.

Confusing.

So here's what the data tells us:

SAFE rounds that raise under $250K have a median valuation cap of $5M, with a healthy amount both above and below that figure. Personally a little apprehensive about the really large val caps at a small cash raise.
$250K-$500K? Median is $6M valuation cap.
$500K-$1M? Big bump up to a $10M median cap.
Beyond $1M, I'd say you're getting into "seed on SAFEs" territory (although I've heard that pre-seed may now extend up to $2M raised).

In any case - clear takeaway here is that there is no "right" answer. People tend to default to round numbers at this stage. I will caution founders that the trend of raising 3 or 4 or even 5 separate SAFE rounds (defined by SAFEs with different valuation caps) may seem like a great way to spend time building instead of fundraising.

But watch out for dilution!

Peter Walker

Peter Walker runs the Insights team at Carta, focused on discovering key data and narratives across the private capital ecosystem. In a former life, he was a marketing executive for a media analytics startup and led the data visualization team at the Covid Tracking Project.