In early-stage conversations we hear the same sentence more and more often: “Let’s not argue about valuation now, let’s sign a SAFE.” The SAFE (Simple Agreement for Future Equity) is a standard document developed by Y Combinator for Silicon Valley practice: the investor pays today and expects shares at the next priced round. It has become a fixture of the Turkish ecosystem too; a substantial share of angel rounds now run on this document or texts derived from it.
Here is the problem: the SAFE is built on the flexibility of Delaware corporate law, and Turkish law has no direct equivalent. A joint stock company cannot hand over today the shares it will issue tomorrow; shares only come into existence through a properly executed capital increase. Every SAFE signed in Türkiye is therefore not a translation but a reconstruction: the automatic conversion mechanism of the US original becomes, in our system, a promise by the parties to carry out certain corporate acts in the future.
The point of this piece is not to talk founders out of SAFEs; a well-built SAFE remains fast and cheap at the early stage. The point is to show what is left hanging when the US template is copied over and signed by a Turkish company. For a broader comparison of these instruments, see our note on SAFEs and SAFTs as private investment vehicles.
What the SAFE solves: postponing the pricing debate
At the early stage, arguing about valuation is usually unproductive; with no revenue on the table, the parties are bargaining over stories rather than numbers. The SAFE defers that argument: the investor pays now and receives shares at the first priced round, at that round’s valuation but with two protective mechanisms. It is not debt; no interest accrues, there is no maturity, and it creates no creditor priority in insolvency. Nor is it equity; on signing, the investor does not become a shareholder, vote or receive dividends.
This in-between position separates the SAFE from convertible notes. A note is a debt: it matures, accrues interest, and if no round has arrived by maturity, a repayment discussion begins. The SAFE carries no such pressure; it waits quietly until a trigger such as a priced round or a sale occurs. The investor’s patience is rewarded through two mechanisms: the discount and the valuation cap.
The SAFE is not the right tool in every situation. If the priced round will clearly close within a few months, taking the investor straight into that round is usually cleaner. Where the investor wants repayment security, a convertible loan structure suits its own nature better; kitting a SAFE out with maturity and interest turns the document into a hybrid creature that is neither debt nor equity, and means carrying the risks of both regimes. The instrument’s strength is its simplicity; every addition that erodes that simplicity is a signal to abandon it.
How do the discount and the cap work together?
The discount lets the investor convert at a set percentage below the share price of the next round; it is the reward for taking early risk. The valuation cap fixes the maximum valuation at which the conversion price will be calculated: however high the company is valued, the SAFE investor is priced at no more than the cap.
Where both appear in one document, the rule is usually that the investor converts by whichever method yields more shares. A concrete example: take a SAFE with a 20 per cent discount and a 10 million dollar cap. If the priced round comes in at a 12.5 million dollar valuation, both routes land on the same price, because 20 per cent off 12.5 million is exactly 10 million. Below 12.5 million the discount governs; above it, the cap does. Founders should model their dilution off the cap, not the round valuation; when several SAFEs stack up, that is where the surprise lives. In negotiation, the cap is an unnamed valuation bargain; despite the talk of “postponing valuation”, the parties are in fact discussing price through the cap. The founder’s strongest argument here is to point out that the cap is a protective ceiling rather than a price, and to anchor its level to a realistic next-round scenario.
There is also the post-money SAFE variant: the investor’s percentage is fixed against a company value calculated as if all SAFEs had already converted. That gives the investor a clean percentage guarantee while loading the whole of the dilution onto the founders. In practice, some founders only notice the difference at the first priced round, modelling the cap table seriously for the first time; by then there is nothing left to negotiate.
Turkish law has no ready-made slot for the SAFE
In the US construction, conversion is completed largely by the company’s own unilateral acts; Delaware law gives the board wide authority to issue shares. Turkish law paints a different picture: in a joint stock company, shares arise only upon a general assembly resolution on a capital increase and its registration. A company’s promise that “you will get shares later” is not the share itself; it is a contractual obligation whose performance depends on the existing shareholders voting a particular way in the future.
This has practical consequences. First, a SAFE in Türkiye should never be signed between the company and the investor alone; it is the shareholders, not the company, who will pass the capital increase resolution. The founders and, ideally, all existing shareholders should be parties, undertaking to vote in favour of the increase at conversion and to waive their pre-emptive rights. Second, the sanction for breach needs thought: specific performance is not always practical, which is why well-built texts carry penalty and indemnity clauses. Third, since the SAFE investor is not a shareholder until conversion, expectations such as information rights or a say in major transactions exist only to the extent they are written into the contract.
The fourth and least discussed issue is what happens if the company is sold or wound up before conversion. The US template gives the investor a choice in that scenario between a refund and the sale proceeds calculated as if conversion had occurred; in the Turkish reconstruction that outcome does not arise by itself, and must be written as an express contractual claim on the distribution of the sale price, underwritten by the existing shareholders. Left unwritten, the SAFE investor sits through the sale negotiation as a creditor of uncertain legal standing.
Conversion: no shares without a capital increase
When conversion is triggered — typically a priced round, a sale of the company or liquidation — the document does not mint shares by itself; the company’s corporate machinery has to run. The general assembly resolves on the increase, existing shareholders decline their pre-emptive rights in the investor’s favour, the increase is registered and the investor is entered in the share register. This is also where the cap-or-discount price meets Turkish nominal value rules: the difference is structured as share premium.
The failure we see most often in practice is a SAFE that has not been synchronised with the priced round documents. The incoming investor wants the SAFE conversions in its own dilution model; a founder doing the conversion arithmetic for the first time mid-round loses negotiating power. The healthy habit is to keep a live conversion table with capital increase scenarios updated after every SAFE signature, and to put it on the table unprompted when the priced round opens.
Stamp duty and the other practical snags
One item that must come to mind when a SAFE is signed in Türkiye is stamp duty. Contracts stating a monetary amount can fall within its scope; whether the duty arises, and on what amount, depends on how the document is structured, how many originals are signed and where. Without getting into rates or figures, this much is worth saying: as the investment amount grows, this item stops being negligible and should be planned with a tax adviser before signature.
The other snags are quieter. A SAFE denominated in foreign currency should say how the exchange difference at conversion is handled. Where several SAFEs carry different caps, MFN clauses extending the best terms to other investors have chain effects. Extra rights granted through side letters will be picked apart, one by one, by the priced round’s investor. None of this makes the SAFE unusable; all of it shows that behind a two-page template sits a genuine piece of contractual architecture.
In short: the SAFE remains a functional way to postpone the valuation debate in Türkiye, but it is not the self-executing mechanism it is in the US; it is a contractual construction held up by the undertakings of the existing shareholders. Working from a text to which the shareholders are party, whose conversion mechanics are aligned with the TCC’s capital increase requirements, and whose penalty clause and stamp duty planning are done before signature — and then keeping a conversion table that absorbs each new SAFE — leaves the founder strong at the priced round, both legally and across the table.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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August 5, 2026Related Practice Areas
Corporate Law
Share transfers, capital increases, board structuring, governance.
View service →US Company Formations & Flip-Ups
Delaware C-Corp, flip-up structures, SAFE/convertible notes, 83(b).
View service →Startup Law
Incorporation, founder agreements, ESOP, term sheets, regulatory matters.
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