SAFE vs Convertible Notes in Singapore: How Startups Raise Before a Priced Round (2026)

By Lucas Seah, Founder of Excellence Singapore Group | Last Updated: July 2026

A SAFE (simple agreement for future equity) and a convertible note solve the same problem in different ways: they let a startup take investment money now and set the share price later, at the next priced round. The difference is legal character. A SAFE is not a loan: it carries no interest and no maturity date, and it simply converts into shares when a qualifying round closes. A convertible note is debt: it accrues interest, it matures, and if the round never comes the company owes the money back. Singapore founders also have a third option most global guides never mention: the CARE (Convertible Agreement Regarding Equity), a Singapore-law convertible instrument in the VIMA model document set published by the Singapore Academy of Law and SVCA. This guide explains how each instrument converts, works one example all the way through the arithmetic, and covers what actually happens at ACRA, IRAS and your registers when conversion day arrives.

Key Takeaways

• A SAFE (simple agreement for future equity) is not a loan: no interest, no maturity date, and it converts into shares at your next priced round.
• A convertible note is debt. It accrues interest and has a maturity date, which hands the investor real leverage if the round never arrives.
• Singapore has its own standard instrument: the CARE (Convertible Agreement Regarding Equity), part of the VIMA model documents from the Singapore Academy of Law and SVCA.
• A post-money valuation cap fixes the investor’s minimum ownership: S$500,000 on a S$5 million cap is 10 percent, measured just before the new round’s shares are issued.
• Conversion is an allotment of new shares: shareholder and board approvals, then a Return of Allotment of Shares filed with ACRA through BizFile.
• IRAS charges share stamp duty on transfer documents, at 0.2% of the higher of the price or the value. A conversion into newly allotted shares creates no transfer instrument to stamp.

What is a SAFE (simple agreement for future equity)?

A SAFE is a short contract with a simple bargain at its core: the investor pays the company money today, and the company promises to issue shares when it next raises a priced equity round. Y Combinator, the US accelerator, introduced the SAFE in late 2013 to strip the negotiation out of early fundraising, and replaced the original pre-money version with the current post-money form in 2018. The documents are published free on Y Combinator’s documents page and include a Singapore version of the post-money SAFE, so the instrument arrives already adapted for a Singapore private limited company.

Three features define the SAFE, and all three are about what it is not. It is not a loan, so it carries no interest. It has no maturity date, so no repayment deadline hangs over the company. And it is not shares yet, so the investor holds no votes and no dividend rights until conversion. Until a priced round arrives, the SAFE sits quietly as a contractual promise of future equity, and, a point founders often miss, entirely outside your ACRA records.

The standard forms carry safety valves: on a sale of the company before conversion the investor receives the higher of their money back or the converted value, and on a winding up their purchase amount ranks ahead of the ordinary shares. But the real bet is that the next round happens.

SAFEs occupy a specific slot in the funding journey: after the founders’ own capital and grant money, and before a priced seed or Series A. Our guide to startup funding and grants in Singapore maps that full sequence.

How does a SAFE convert? Caps, discounts and the MFN clause

Every SAFE answers one question: when the priced round comes, what price does the early investor pay for their shares? The standard forms give three answers.

The post-money valuation cap. The cap matters when the round values the company above it: the SAFE then converts as if the valuation were the cap, handing the early investor a better price than the new money pays. Because the current forms are post-money, the arithmetic is direct: the investor’s minimum ownership equals the investment divided by the cap, measured immediately after every convertible converts and before the new round’s shares are issued. S$500,000 on a S$5 million post-money cap is a 10 percent stake at that measurement point, however high the round prices.

The discount. A discount SAFE converts at the round’s price per share less a fixed percentage. Market practice runs from 10 to 25 percent, with 20 percent the figure seen most often. A 20 percent discount on a S$8.00 round price gives a S$6.40 conversion price.

The MFN clause. The third standard form has no cap and no discount, carrying a most favoured nation clause instead: if the company later issues another convertible on better terms, the MFN investor can adopt those terms. It suits the earliest cheques, before anyone wants to argue about valuation.

The published forms carry one lever each. Bespoke drafts sometimes combine a cap and a discount and convert at whichever gives the lower price, but that is a negotiation outcome, not a default.

Before signing anything, model it. A fractional CFO runs the conversion scenarios across your cap, your discount and your likely round size, keeps every outstanding instrument reflected in the cap table, and shows you the founder dilution each term sheet actually implies, at a fraction of the cost of a full-time hire.

A worked example: S$500,000 on a S$5 million post-money cap

Follow one concrete raise all the way through the arithmetic.

The setup:

• The founders hold 900,000 ordinary shares.
• An investor puts in S$500,000 on a post-money SAFE with a S$5,000,000 post-money valuation cap and no discount (the shape of the YC Singapore form).

The conversion entitlement:

• Minimum ownership = S$500,000 divided by S$5,000,000 = 10 percent, measured immediately after conversion and before the new round’s shares are issued.
• The founders’ 900,000 shares therefore represent the other 90 percent, so the fully converted total is 1,000,000 shares.
• The SAFE converts into 100,000 new shares, at an effective price of S$500,000 divided by 100,000 = S$5.00 per share. Cross-check: the S$5,000,000 cap divided by 1,000,000 converted shares is the same S$5.00.

Eighteen months later the company raises a Series A: S$2,000,000 at a S$8,000,000 pre-money valuation, with the SAFE conversion counted inside the pre-money.

• Price per share = S$8,000,000 divided by 1,000,000 shares = S$8.00.
• The Series A investor receives S$2,000,000 divided by S$8.00 = 250,000 new shares.
• Post-round: 1,250,000 shares in total. The founders hold 900,000 (72 percent), the SAFE investor 100,000 (8 percent), and the Series A investor 250,000 (20 percent).

The SAFE investor paid an effective S$5.00 against the round’s S$8.00, a 37.5 percent saving for backing the company early. Had the SAFE carried a 20 percent discount and no cap instead, it would have converted at S$8.00 x 0.80 = S$6.40, buying 78,125 shares. And had the same S$500,000 been a convertible note at 6 percent simple interest running those 18 months, S$45,000 of accrued interest would convert too: S$545,000 of conversion amount rather than S$500,000.

Two honesty notes on the model. The variant calculations hold the round price at S$8.00 for comparability; in a live round, every converting instrument feeds back into the price-per-share arithmetic. And real rounds usually layer in an ESOP pool top-up before the money lands, one more claim on the same pie. Tracking all of it round by round is a cap table job, which our cap table and dilution guide walks through with its own calculator.

What is a convertible note and when does it fit better?

A convertible note reaches the same destination by a different legal road. It is a loan from day one: the company owes the principal, interest accrues (single-digit simple interest is the common market shape), and a maturity date, typically 12 to 24 months out, sets a deadline. The conversion machinery on top makes it a fundraising instrument: on a qualifying priced round, the principal plus accrued interest converts into shares, with a cap or discount doing the same pricing work as in a SAFE.

The debt character shifts the power balance in three places. First, maturity: if no round has arrived by the date, the investor can demand repayment, agree an extension, or negotiate conversion at a pre-agreed valuation, and each of those is leverage a SAFE holder never gets. Second, interest: the conversion amount grows with time, so founder dilution creeps upward while the round is delayed. Third, insolvency: a noteholder is a creditor and ranks as one if things go wrong.

A note fits when the investor insists on downside protection, or the money is a bridge to a known event such as a term sheet already in hand. A SAFE or CARE fits when speed matters, the raise is a rolling collection of smaller cheques, or the company cannot carry a repayment overhang while it builds.

For drafting, you do not need US paper for the note either: the VIMA set includes a Singapore-law model convertible note, covered next.

What are VIMA and the CARE, Singapore’s own model documents?

VIMA stands for Venture Capital Investment Model Agreements: a set of model legal documents for startup investment published jointly by the Singapore Academy of Law and the Singapore Venture and Private Capital Association (SVCA), drafted with a working group of law firms, venture funds and startups. The current release is VIMA 2.0, with several documents carrying further updates, and the whole set is free to download from SVCA.

The Series A suite covers the priced-round paperwork: term sheets, a subscription agreement, a shareholders’ agreement, a model constitution, an employee share option plan primer and a model convertible note, among others. The pre-Series A suite is the one this post cares about: it contains the CARE (Convertible Agreement Regarding Equity), alongside a founders’ agreement, a mutual NDA and an employee IP assignment deed.

The CARE is Singapore’s answer to the SAFE. It does the same job, money now and shares at the next qualifying round with cap and discount mechanics doing the pricing, but it is drafted under Singapore law, with dispute resolution and boilerplate that Singapore counsel and local investors recognise on sight. That solves the quiet problem with YC paper here: while YC’s Singapore version adapts the essentials, a Singapore-law instrument removes the governing-law conversation entirely. If your investors are local funds or angels, expect the CARE, or a close cousin of it, to feel like home ground.

What happens in Singapore when a SAFE or note converts?

Conversion reads as automatic in the instrument’s text, but in company-law terms it is an allotment of new shares, and Singapore attaches specific steps to that.

Approvals come first. Under the Companies Act, directors need shareholder approval to allot new shares, given either as a general share issue mandate or as a specific resolution. The clean practice is to have that authority in place when the SAFE or note is signed, not to chase signatures while a Series A closing timetable runs. The board then resolves to allot the conversion shares when the trigger fires.

Then the ACRA filing. The company files a Return of Allotment of Shares with ACRA through BizFile, and for a private company the allotment takes effect once ACRA’s electronic register of members is updated. This is also the moment your ACRA profile catches up with reality: until conversion, SAFE and CARE holders appear nowhere in ACRA’s records. The invested amounts land in share capital at conversion; our paid-up capital guide explains how that capital is treated.

Stamp duty is narrower than founders fear. IRAS charges share stamp duty on documents that transfer existing shares: the dutiable documents are the sale contract or the instrument of transfer, and the duty on a transfer is 0.2% of the higher of the price or the value of the shares transferred. A conversion is different in kind. The company allots new shares to the investor, nothing moves from an existing shareholder, and no instrument of transfer is signed, so the conversion itself does not create a share-transfer stamp duty bill. The duty enters the picture when existing shares change hands, in a founder secondary sale for example, and our guide to transferring shares in a Singapore company covers those mechanics, deadlines included.

Accounting is the trap nobody budgets for. Whether a SAFE, CARE or note sits as a liability or as equity in your financial statements depends on its exact terms, and the classification analysis under Singapore’s reporting standards is genuinely complex: get professional advice before year-end, and see our SFRS guide for the framework the analysis happens inside.

SAFE, CARE, convertible note or priced round: which should you choose?

The instrument should follow the situation, not the fashion. For a first cheque of modest size, speed wins: a SAFE or CARE closes on standard paper in days, with legal cost to match. For a bridge with a hard deadline, or an investor who wants creditor protection while they wait, a note earns its extra negotiation. And when the raise is large enough that the investor wants a board seat, vetoes and full shareholder protections, stop stretching convertibles and price the round: the shareholding structure you set between founders, investors and the ESOP deserves priced-round documentation at that point.

One caution: convertibles stack quietly. Each SAFE looks small on its own, but three or four of them plus a pool top-up convert at the same moment, and founders often discover the combined dilution only when the Series A lawyers build the pro forma cap table. Whatever you sign is also read again later: every instrument goes into the data room, and our investor due diligence guide shows how today’s choices become tomorrow’s questions.

Feature	SAFE or CARE	Convertible note	Priced equity round
Is it debt?	No. A contractual right to future shares	Yes. A loan that converts	No. Shares are issued at closing
Interest	None	Yes, accrues until conversion or repayment	None
Maturity date	None	Yes, typically 12 to 24 months	Not applicable
Is the company valued now?	No. A cap or discount frames the future price	No. Cap or discount, plus accrued interest	Yes. The round fixes the price per share
Conversion trigger	Next qualifying priced round, sale of the company, or winding up	Qualifying round, maturity, or sale of the company	Not applicable. Shares are allotted at completion
Investor rights before shares are issued	Minimal. No votes or dividends; side letters can add information or pro rata rights	Creditor rights, plus anything negotiated	Full shareholder rights from day one
Paperwork and cost	Lightest. Short standard documents	Moderate. Loan terms need negotiating	Heaviest. Shareholders’ agreement, constitution changes, full due diligence
Speed to close	Days to weeks	A few weeks	Two to three months in market practice
Singapore model documents	YC Singapore post-money SAFE; VIMA CARE	VIMA model convertible note	VIMA Series A suite: term sheet, subscription and shareholders’ agreements
Dilution certainty at signing	Investor minimum ownership fixed by a post-money cap	Moves with interest and time to conversion	Exact. Priced at closing

Frequently asked questions

How does a SAFE work?

A SAFE is a contract where an investor pays the company money now in exchange for shares to be issued at the next priced funding round. It is not a loan: it carries no interest and has no maturity date. When the round closes, the SAFE converts into shares at a price set by its valuation cap or discount, which usually works out better than the price the new investors pay.

What is the difference between a SAFE and a convertible note?

A convertible note is debt and a SAFE is not. The note accrues interest, has a maturity date, and must be repaid, extended or converted when it falls due, which gives the investor leverage if no round arrives. A SAFE has no interest, no maturity and no repayment claim in the ordinary course; it waits for a qualifying round, a sale of the company or a winding up.

What is a CARE in Singapore?

The CARE (Convertible Agreement Regarding Equity) is the Singapore-market equivalent of the SAFE. It sits in the pre-Series A suite of the VIMA model documents published by the Singapore Academy of Law and SVCA, and it converts an investment into shares at the next qualifying round using cap and discount mechanics, in a Singapore-law document local investors recognise.

Do SAFEs convert automatically?

Conversion is automatic in contractual terms: when a qualifying priced round closes, the standard forms convert without the investor needing to opt in. The company must still complete the steps that give conversion legal effect in Singapore: shareholder authority and a board resolution to allot the shares, a Return of Allotment of Shares filed with ACRA, and updates to the register of members and the cap table.

Is a SAFE debt or equity?

Legally it is neither until conversion. A SAFE is not debt, because there is no interest, no maturity date and no right to repayment in the ordinary course. It is not equity yet either, because the investor holds no shares, votes or dividend rights until conversion happens. How it is classified in the company’s financial statements depends on its exact terms, so take accounting advice on your specific instrument.

What approvals does a Singapore company need when a SAFE converts?

The directors need shareholder approval to allot the new shares, given as a general share issue mandate or a specific resolution, plus a board resolution approving the allotment itself. The company then files a Return of Allotment of Shares with ACRA through BizFile, and for a private company the allotment takes effect once ACRA’s electronic register of members is updated.

Raise on the right instrument

An early raise is won on execution: the right instrument, modelled honestly, signed with the approvals already in place, and reflected in a cap table you would happily show a Series A lawyer. Excellence Singapore supports founders across that whole sequence: a fractional CFO to model conversion scenarios and keep the numbers investor-ready, corporate secretarial support for the resolutions and ACRA filings, and accountants who can tell you how the instrument sits in your financial statements before your auditor asks. Talk to us before you send the first draft to an investor, and the document you sign will be the one you meant to sign.