"Standard" Paperwork Is the Most Dangerous Kind.
I reviewed a Series A term sheet yesterday. The founder, Sarah, thought she owned 60% of her company. After I ran the math, she actually owned 48%. She lost 12% of her company (worth ~$3 Million) because she didn't understand one word in her Seed Round contract: "Post-Money."
In 2025, investors have shifted almost exclusively to "Post-Money SAFEs." They tell you: "It’s standard! It’s easier to calculate!" It is easier. Easier for them to steal your equity.
Here is the math they don't explain to you.
1. The Dilution Trap (You Pay for Everything)
In the old days ("Pre-Money SAFEs"), when you raised more money, everyone got diluted equally. In a Post-Money SAFE, the investor locks in their ownership forever until the priced round.
The Math:
- You raise $1M on a $10M Post-Money Cap.
- The investor owns 10%. Period.
- The Trap: If you raise another $1M from a different angel before the Series A, that new 10% doesn't dilute the first investor. It dilutes YOU.
The Post-Money investor says: "I bought 10%. I keep 10%. Any new money you raise comes out of YOUR pocket, not mine." I have seen founders raise 3 or 4 SAFE rounds and wake up realizing they sold 40% of the company before they even hired an employee.
2. The "Option Pool" Shuffle
Investors will ask you to create an "Employee Option Pool" (usually 10-15%) before the round closes. In a Post-Money SAFE, this pool comes 100% out of the Founder's shares. The SAFE holders don't suffer any dilution from the pool creation. You are effectively giving free equity to employees while the investors stay protected.
3. The "Shadow" Valuation
You think you raised at a $10M Cap. But because of the math of Post-Money SAFEs, your effective pre-money valuation might be $6M. When you go to raise your Series A, the new VCs will look at your cap table and say: "Wow, you are already diluted to hell. We can't invest because there isn't enough 'Founder Skin in the Game'." The Fix: You must run a "Pro-Forma Cap Table" before you sign anything. Do not trust the investor's spreadsheet. Use your own.