Kirsty Nathoo introduces the topic of startup financing, focusing on SAFEs, equity, and common misunderstandings in raising money.

• Kirsty Nathoo, CFO and partner at Y Combinator, has worked with over 1500 companies on incorporation, investments, and fundraising.
• The presentation aims to clarify common misconceptions about startup financing and help founders avoid typical mistakes.
• Key message: Founders must be aware of how much of the company they have sold to investors and, consequently, how much they own.

Kirsty delves into the details of Simple Agreement for Future Equity (SAFE) notes, explaining their structure and conversion mechanics.

• SAFE stands for Simple Agreement for Future Equity, an instrument where an investor gives money now for future shares.
• Negotiation points on a SAFE are typically limited to the amount invested and the valuation cap.
• Kirsty introduces the concept of post-money SAFEs, which are designed to make it easier for founders to understand dilution.
• She walks through the anatomy of a SAFE, highlighting key sections and emphasizing the simplicity of the agreement.

The concept of dilution is explained as Kirsty walks through the life cycle of a company from incorporation to a priced Series A round.

• Dilution occurs when the company issues new shares, impacting the ownership percentage of existing shareholders.
• Kirsty illustrates the dilution effect by walking through scenarios of raising money on SAFEs and hiring employees with equity.
• She demonstrates how the founders' ownership percentage decreases as the company issues new shares for investments and employee equity.

Kirsty explains how post-money SAFEs convert during a priced round and the subsequent impact on the company's cap table.

• In a priced round, the order of events is: SAFEs convert to shares, the option pool is increased, and then new investors invest.
• The SAFE conversion is based on the post-money valuation cap, and the price per share for new investors is determined by pre-money valuation and total capitalization.
• Kirsty illustrates the process, calculations, and resulting changes in the cap table, demonstrating how founders' ownership is diluted.

Kirsty concludes the presentation with key takeaways and tips for startup founders regarding fundraising and ownership dilution.

• Use post-money SAFEs to better track dilution and understand the ownership structure.
• Avoid over-optimizing for valuation caps; focus on building the company and making it successful.
• Maintain an accurate cap table and be aware of the implications of each fundraising round on founder ownership.