A SAFE (Simple Agreement for Future Equity) is the instrument that closes most early-stage rounds today: the investor pays now and receives shares when a priced round, liquidity event, or dissolution occurs. There is no interest, no maturity date, and no valuation negotiation — which is why, on Carta, SAFEs reached roughly 90% of all pre-seed rounds in early 2025, and about 87% of those are Y Combinator’s post-money form. The catch for Turkish founders: these templates were written for Delaware corporations, and using them with a Turkish A.Ş. without adaptation is the single most common source of broken cap tables we clean up before financings.
How a SAFE actually works
A SAFE defers pricing, not economics. Two numbers do the work:
- Valuation cap — the maximum company valuation at which the investment converts. If you raise your priced round above the cap, the SAFE holder converts as if the company were worth the cap, getting more shares per dollar than new investors.
- Discount — a percentage reduction (typically 10–25%) on the priced-round share price. Where a SAFE has both, the investor gets whichever produces more shares — never both combined.
The post-money mechanics matter more than founders expect: a $500K SAFE at a $5M post-money cap entitles the investor to 10% of the company immediately before the priced round — and that percentage is fixed regardless of how many other SAFEs you stack afterwards. Every additional SAFE dilutes only the founders, not earlier SAFE holders. Stack $1.5M across three SAFEs at a $5M cap and you have already committed 30% of the company before any Series A investor walks in. Model the stack before signing, not after.
SAFEs under Turkish law — and the June 2026 turning point
A SAFE has always been enforceable in Türkiye as an innominate (sui generis) contract — the real problem was the conversion plumbing, because Turkish corporate law had no workable “automatic conversion” mechanism. That changed materially on 4 June 2026: an omnibus law published in the Official Gazette (No. 33270) added a new paragraph to Article 3 of Law No. 5746, providing that privately-held companies holding the Ministry of Industry and Technology’s Tech-Startup Badge (Teknogirişim Rozeti) may run conditional capital increases based on convertible-debt agreements without being subject to the TTK’s conditional-capital regime. Procedures will be set by secondary regulation. We unpacked the amendment, its background and its open questions in Is the SAFE Finally Legal in Türkiye? — the short version follows.
- What the law fixed. The fund side was never the problem: the CMB’s Venture Capital Investment Fund Communiqué already let GSYFs finance startups through convertible debt, requiring a pre-money agreement covering maturity, interest and conversion terms. What was missing was the company-side mechanism — how conversion actually mints a Turkish share. Article 11 of the omnibus law closes exactly that gap for badge-holding companies, removing the TTK conditional-capital formalities that made SAFE-style conversion impossible to run as written.
- What is still open. The secondary regulation has not been issued, so badge-holders cannot rely on the new route yet. And a criminal-law shadow remains: until conversion, a convertible instrument is debt, and an outside investor lending at interest without being a shareholder can formally resemble usury under Article 241 of the Penal Code (tefecilik) — a line the implementing rules need to draw safely before cautious counsel treats the route as default. The boundary with capital-maintenance rules is equally a directors’-liability issue.
- The route everyone else still uses: conversion = capital increase. For companies without the badge — and for everyone until the secondary regulation lands — shares are delivered through a capital increase subscribed by the investor, the excess over nominal booked as share premium (emisyon primi). The SAFE must obligate founders and the company to call the general assembly and vote the increase, with penalties or buy-back mechanics if they fail, since specific performance against a general assembly is slow.
- Currency and FX discipline. SAFEs are routinely denominated in USD. The payment into a Turkish company must respect FX legislation and be documented so the share-premium accounting survives a tax inspection; sloppy wiring descriptions cause real diligence pain later.
- Tax characterisation. Until conversion, treat the SAFE as an advance for future equity, not a loan — debt-flavoured drafting invites withholding and thin-capitalisation questions (and worsens the Article 241 optics). Properly structured conversion into capital plus premium is not taxable income for the company.
- Foreign-investor formalities. FDI notification, investor tax numbers and an up-to-date share ledger — the first items the other side’s counsel checks at the next round.
What belongs in the side letter
The YC SAFE is deliberately minimal, so investor asks live in a side letter: pro-rata rights for the next round, information rights (quarterly financials, annual budget), and sometimes an MFN clause promising the investor the benefit of better terms given to later SAFE holders. Keep side letters consistent across the round — a stack of conflicting MFNs is a diligence problem you create for yourself.
The mistakes we keep fixing
- Stacking SAFEs at different caps with no dilution model — founders discover at Series A they own less than expected.
- Using the pre-money SAFE form (or mixing pre- and post-money in one round) without realising the dilution allocation is fundamentally different.
- Copy-pasting the Delaware template with zero Turkish-law conversion mechanics — the “automatic” conversion clause is unenforceable as written against an A.Ş.
- Promising ESOP top-ups and SAFE conversions that, combined, mathematically exceed what founders can deliver.
- No board/GA authorisations prepared in advance, turning a one-week conversion into a two-month negotiation.
When to stop stacking and price the round
Rules of thumb that hold up in practice: when total SAFE money approaches 20–25% of the company on a converted basis, when a lead investor is willing to set a price, or when you need a real board and governance — price the round. A priced round costs more in legal fees but resets the cap table with certainty; an endless SAFE stack defers a reckoning that only gets more expensive.
Start with the essentials
- SAFE — definition and conversion walk-through
- Valuation cap and discount — the two numbers that matter
- Convertible note — the debt-flavoured alternative and when it fits better
- Pre-money vs post-money valuation — why YC moved SAFEs to post-money
- Term sheet and pro-rata rights — the negotiation layer
- ESOP and vesting — how the option pool interacts with SAFE dilution
Documents and checklists
- YC SAFE documents — all three post-money templates, annotated
- NVCA model documents — for the priced round that follows
- VC due diligence checklist — what investors verify before wiring
Deeper reading
- Is the SAFE Finally Legal in Türkiye? The June 2026 convertible-debt amendment for Tech-Startup Badge holders
- SAFEs vs SAFTs — private investment vehicles compared
When you need counsel
We close SAFE rounds for Turkish and US-incorporated startups weekly — drafting and adapting conversion mechanics to the A.Ş. structure, side letters, dilution modelling, and the FX and tax paperwork that keeps the round clean at the next diligence. See Startup & Scaleup Advisory; if your investors require a Delaware topco first, start with the Flip-Up Guide.