A foreign angel investor wants to invest USD 500,000 in a Turkish technology startup.

The founders do not want to negotiate the company’s final valuation today.

The investor does not want to provide a traditional loan.

Both sides want to complete the financing quickly and agree that the investor will receive shares when the startup raises its next priced investment round.

In the United States, one of the most familiar solutions would be a:

SAFE — Simple Agreement for Future Equity.

SAFE agreements have become one of the most commonly used early-stage startup financing instruments internationally.

Türkiye’s official startup ecosystem publications also recognize SAFE as a financing structure under which an investor provides cash to a company and receives company shares at a later stage upon the occurrence of a specified event.

But an important legal question arises:

Can the same SAFE simply be signed with a Turkish company?

The short answer is:

A SAFE-type investment can be structured in Türkiye, but a U.S.-style SAFE should not simply be copied and expected to operate automatically under Turkish company law.

Turkish law does not contain a dedicated statutory SAFE regime comparable to the flexibility available in some U.S. jurisdictions.

The contractual relationship may be created, but the future issuance of Turkish company shares must still comply with the Turkish Commercial Code.

For foreign investors, this distinction is crucial.

A valid agreement promising future equity does not necessarily mean that the investor automatically becomes a shareholder when the next funding round occurs.

The investment documents must therefore address both:

the contractual promise of future equity

and

the corporate-law mechanism through which the shares will actually be delivered.

1. What Is a SAFE?

SAFE stands for:

Simple Agreement for Future Equity.

The structure was originally developed by Y Combinator as an alternative to convertible debt.

The basic concept is straightforward.

The investor provides money to the startup today.

The startup does not immediately issue shares.

Instead, the investor obtains the right to receive shares in the future when a specified event occurs.

Typical trigger events include:

• a priced equity financing round;
• sale of the company;
• merger;
• IPO;
• or liquidation.

The investor therefore takes substantial early-stage risk without requiring the founders to determine a precise company valuation immediately.

2. Is a SAFE a Loan?

Usually, no.

This is one of the main differences between a SAFE and a convertible note.

A traditional convertible loan or convertible note normally includes:

• principal;
• maturity;
• repayment obligation;
• and often interest.

A SAFE ordinarily does not have:

• traditional interest;
• a fixed maturity date;
• or an ordinary right to demand repayment simply because time has passed.

The economic expectation is that the investment will eventually turn into equity rather than being repaid as ordinary debt.

Recent Turkish legal analysis accordingly treats the SAFE as potentially closer to a sui generis contractual future-equity undertaking than an ordinary consumption loan under Turkish law.

This distinction becomes important in Türkiye because the legal structure selected for the investment may affect:

• accounting;
• taxation;
• capital increase procedures;
• insolvency;
• and investor enforcement rights.

3. Why Do Startups Use SAFEs?

Early-stage companies frequently face a valuation problem.

Assume a startup:

• was incorporated six months ago;
• has developed an MVP;
• has 2,000 users;
• has little revenue;
• and needs USD 400,000 to continue developing its product.

What is the company worth?

USD 2 million?

USD 5 million?

USD 10 million?

At such an early stage, the valuation may be largely speculative.

A SAFE allows the parties to postpone that debate until a later priced investment round when more information is available.

This can reduce:

• negotiation time;
• legal costs;
• valuation disputes;
• and transaction complexity.

4. How Does a SAFE Investor Make Money?

The investor usually receives better economic terms than investors joining the later priced round.

This compensation for taking earlier risk is commonly achieved through:

• a valuation cap;
• a discount;
• or both.

5. What Is a Valuation Cap?

A valuation cap establishes the maximum valuation used to calculate the SAFE investor’s future equity.

Example:

SAFE Investment:

USD 500,000

Valuation Cap:

USD 5 million

Next Series A valuation:

USD 10 million.

The SAFE investor may convert using the USD 5 million cap rather than the later USD 10 million valuation.

Economically, this allows the early investor to acquire more shares than it would have received by investing at the Series A price.

The investor is rewarded for taking risk before the company’s value was established.

6. What Is a SAFE Discount?

Instead of a valuation cap, the SAFE may contain a conversion discount.

Example:

SAFE Discount:

20%

Series A share price:

USD 10 per share.

SAFE conversion price:

USD 8 per share.

The SAFE investor therefore receives more shares for the same investment amount than the later investor.

7. Can a SAFE Include Both a Valuation Cap and a Discount?

Yes.

Many SAFE arrangements contain both.

The agreement can provide that the investor converts using whichever calculation produces the more favorable price.

For example:

Valuation cap calculation:

USD 7 per share.

20% discount calculation:

USD 8 per share.

The SAFE investor would typically convert at:

USD 7 per share.

The exact mechanism should be expressed mathematically in the agreement.

Ambiguous conversion formulas are one of the easiest ways to create a future shareholder dispute.

8. What Is an MFN SAFE?

An alternative is an MFN — Most Favored Nation SAFE.

An MFN clause may provide that if the company later grants a new SAFE investor more favorable terms, the earlier investor can elect to benefit from those terms.

Example:

Investor A signs a SAFE without a valuation cap.

Three months later, Investor B receives:

USD 4 million valuation cap.

An MFN clause may allow Investor A to adopt the more favorable economic provision.

The agreement should specify which terms qualify for MFN protection.

9. Is SAFE Specifically Regulated Under Turkish Law?

Not through a dedicated statutory SAFE regime.

The Turkish Commercial Code does not create a standalone financing instrument called a “SAFE.”

Recent Turkish legal analysis therefore approaches SAFE agreements through general Turkish contract-law principles together with company-law rules governing future share issuance.

This does not mean that parties are prohibited from creating a SAFE-style economic arrangement.

It means that the investor and startup cannot assume that the U.S. document will automatically produce the same corporate result in Türkiye.

The underlying contract and the subsequent share issuance must be analysed separately.

10. Can the Parties Sign a SAFE Under Freedom of Contract?

Turkish contract law generally permits parties to design contractual arrangements that are not individually named in legislation, provided that they do not violate mandatory law, morality, public order or other applicable legal limitations.

Accordingly, a SAFE may potentially be structured as a sui generis contract providing the investor with conditional future equity rights.

Recent Turkish legal analysis relies on Article 26 of the Turkish Code of Obligations for this contractual characterization.

However:

contractual validity does not automatically solve the share issuance problem.

That is the central issue foreign investors must understand.

11. Signing the SAFE Does Not Immediately Make the Investor a Shareholder

When the investor signs a SAFE and transfers USD 500,000, the investor ordinarily does not immediately become a shareholder.

Until the agreed conversion mechanism is completed, the investor generally does not automatically receive normal shareholder rights such as:

• voting rights;
• dividend rights;
• general assembly participation;
• statutory shareholder information rights;
• board appointment rights;
• or liquidation rights arising purely from share ownership.

The investor initially holds contractual rights.

This is very different from subscribing to a capital increase and receiving shares immediately.

12. The Biggest Turkish-Law Problem Is Automatic Conversion

A standard international SAFE may say that the SAFE:

“automatically converts”

upon the next equity financing.

This works more easily in corporate systems where the company already has substantial authorized but unissued shares and the board can issue them under relatively flexible procedures.

Turkish corporate law is more formal.

An investor cannot simply become the holder of newly issued Turkish company shares because a private contract says:

“Conversion shall occur automatically.”

The necessary Turkish corporate procedures still have to be completed.

Recent Turkish legal analysis identifies this as one of the principal difficulties in directly importing a U.S.-style SAFE into Türkiye.

13. How Can a SAFE Convert Into Shares in Türkiye?

There are several possible structures.

The appropriate method depends on:

• whether the target is an A.Ş. or Ltd. Şti.;
• existing Articles of Association;
• current shareholders;
• size of the SAFE;
• future funding expectations;
• and the investor’s required protection.

One common approach involves an ordinary capital increase when the conversion event occurs.

14. Conversion Through a Capital Increase

Assume:

Startup capital before financing:

TRY 1 million.

Foreign investor signs a SAFE:

USD 500,000.

One year later, the startup raises Series A funding.

The SAFE agreement provides that the investor is entitled to shares calculated using the agreed valuation cap.

At that stage, the company can undertake the corporate steps necessary for a capital increase.

The SAFE investor then subscribes for newly issued shares.

Recent Turkish analysis identifies ordinary capital increase by capital commitment as one of the principal mechanisms through which SAFE-type rights may be implemented in practice.

The SAFE payment may need to be appropriately reflected in the company’s accounts and coordinated with the capital subscription mechanics.

This should be planned with both legal and accounting advisers when the SAFE is signed — not only when conversion occurs.

15. Existing Shareholders’ Pre-Emption Rights Must Be Considered

A capital increase creates another problem.

Existing shareholders may have statutory rights to participate in newly issued shares.

This is commonly referred to as the pre-emptive right or rüçhan hakkı.

Therefore, if shares are to be issued specifically to the SAFE investor, existing shareholder rights must be addressed through a legally valid mechanism.

Recent Turkish SAFE analysis specifically identifies the restriction or waiver of existing shareholders’ pre-emption rights as an important step when SAFE conversion is implemented through an ordinary capital increase.

This creates execution risk.

Imagine:

Founder A: 45%

Founder B: 35%

Existing Investor: 20%.

Company previously signed a SAFE with Investor C.

Conversion time arrives.

Existing Investor refuses to cooperate with the capital increase.

The SAFE contract may say Investor C is entitled to 10%.

But Investor C still needs the required corporate decisions to actually receive newly issued shares.

A properly structured SAFE must anticipate this possibility.

16. Founders Should Usually Be Parties to the SAFE Structure

A SAFE signed only between:

Startup Company

and

Foreign Investor

may create significant enforcement risk.

Why?

Because some corporate decisions require cooperation from existing shareholders.

If those shareholders did not personally agree to support the future conversion, they may later refuse to:

• vote for the capital increase;
• waive or restrict pre-emption rights;
• amend the Articles;
• or complete related corporate procedures.

One practical solution is to make key founders and shareholders parties to the transaction documentation.

They can undertake to:

• vote in favor of the required capital increase;
• cooperate with conversion;
• waive relevant rights where legally permissible;
• and execute necessary corporate documents.

The transaction then creates contractual obligations not only for the company but also for the persons whose votes may be necessary.

17. A Founder Share Transfer Can Be Used as a Backup

Another protection can involve a founder share transfer undertaking.

For example, the SAFE may provide:

If the company is unable to issue the agreed shares following a conversion event because the necessary capital increase cannot be completed, founders must transfer an equivalent number of their existing shares to the investor.

Recent Turkish SAFE analysis specifically identifies founder share-transfer undertakings as a possible additional safeguard against failure of the capital increase mechanism.

This can significantly improve the investor’s position.

However, the transfer mechanism must comply with Turkish rules applicable to the company’s legal form.

18. A SAFE Is Easier to Structure in an A.Ş. Than in Some Ltd. Şti. Structures

Startup investors should consider the company’s legal form before using a SAFE.

Turkish joint stock companies — anonim şirket (A.Ş.) — generally provide greater flexibility for:

• venture investment;
• share classes;
• transfer of shares;
• institutional investment;
• and subsequent financing rounds.

Official Invest in Türkiye guidance notes that international investors are generally subject to the same rules as domestic investors and that Turkish corporate structures operate under the Turkish Commercial Code.

A Turkish limited liability company — Ltd. Şti. — can also receive investment.

However, transfer of limited company shares is subject to more formal statutory requirements, making some future equity mechanisms less flexible.

Startups planning repeated venture rounds should therefore consider company structure before the first investment.

19. Conditional Capital Increase May Sometimes Be Considered

Turkish Commercial Code Article 463 provides a separate mechanism called conditional capital increase for joint stock companies.

Under Article 463, the general assembly may create rights for specified creditors or employees to obtain new shares through conversion or subscription rights associated with newly issued bonds or similar debt instruments.

This mechanism is designed particularly for instruments such as convertible debt.

Because SAFE instruments also contemplate future shares, Turkish legal commentary has considered whether conditional capital increase could potentially be adapted for SAFE-type financing.

However, this is not a simple solution.

Article 463 is structured around:

• bonds;
• similar debt instruments;
• conversion or purchase rights;
• and specific statutory requirements.

A traditional SAFE deliberately attempts not to be debt.

For this reason, relying on Article 463 requires careful transaction-specific analysis rather than assuming that every SAFE qualifies automatically.

20. Why Not Simply Treat the SAFE as Convertible Debt?

This is one possible alternative.

Instead of using a pure SAFE, parties can structure the transaction as a:

convertible loan

or

convertible investment agreement.

This can sometimes fit more naturally into established Turkish concepts because the investor becomes a creditor before conversion.

But it changes the economics.

A convertible loan may include:

• interest;
• maturity;
• repayment rights;
• default provisions;
• and creditor status.

Those characteristics are precisely what SAFE agreements were designed to avoid.

The correct question is therefore not:

“Which document is easier to copy?”

It is:

“Which legal and economic structure reflects what the parties actually want?”

21. SAFE vs Convertible Note

The basic distinction can be summarized as follows:

SAFE

Usually:

• no fixed maturity;
• no ordinary interest;
• no ordinary repayment right;
• future equity expectation;
• valuation cap and/or discount.

Convertible Note

Usually:

• debt instrument;
• principal obligation;
• maturity;
• potentially interest;
• conversion into shares upon agreed events.

Both can postpone valuation.

But their legal and economic consequences are different.

Foreign investors should therefore avoid calling an instrument “SAFE” when the agreement actually behaves like an ordinary loan.

22. What Happens If the Next Funding Round Never Occurs?

This is one of the biggest SAFE risks.

Assume the investor provides:

USD 500,000.

The SAFE converts only when the startup raises at least:

USD 2 million

in a qualified equity financing.

But the startup never raises another round.

What happens?

A traditional SAFE does not necessarily give the investor an ordinary maturity-based repayment right.

The investment can remain outstanding for years.

The agreement should therefore define precisely:

• Qualified Financing;
• Liquidity Event;
• Dissolution Event;
• merger;
• asset sale;
• IPO;
• and any long-stop protections the parties agree to include.

The investor must understand that SAFE capital can be significantly less liquid than a loan.

23. What Happens If the Company Is Sold Before Conversion?

The SAFE should address this expressly.

Suppose:

Foreign investor invests:

USD 500,000.

No priced round occurs.

Two years later the startup is acquired for:

USD 20 million.

The SAFE should explain whether the investor:

• receives the original investment amount;
• receives the amount it would have received had the SAFE converted;
• chooses the greater of the two;
• receives another agreed return;
• or participates according to a defined liquidity formula.

Leaving this issue undefined can create a major acquisition dispute.

24. What Happens if the Startup Fails?

A SAFE investor is taking genuine startup risk.

If the company fails and enters liquidation, the SAFE should define the investor’s position.

This is particularly important because:

a SAFE investor is not necessarily an ordinary shareholder, but also may not be an ordinary lender.

The liquidation waterfall must therefore be reviewed under mandatory Turkish insolvency and corporate rules.

A contractual clause cannot simply give the investor priority over creditors where mandatory law provides otherwise.

Investors should understand their position before making the investment.

25. SAFE Investors Do Not Automatically Receive Voting Rights

Before conversion, SAFE investors ordinarily do not hold shares.

This means they normally do not automatically possess shareholder voting rights.

An investor wishing to receive governance protection before conversion may therefore negotiate contractual rights such as:

• information rights;
• inspection rights;
• consent rights;
• notification rights;
• observer rights;
• or restrictions on specific company actions.

For example:

The Company shall not issue another SAFE with a valuation cap below USD 5 million without Investor consent.

Such rights remain contractual and should be drafted carefully.

26. Information Rights Are Particularly Important

An investor may wait several years before conversion.

During that period, the company could:

• issue other SAFEs;
• obtain loans;
• grant employee options;
• issue new shares;
• transfer intellectual property;
• change founders;
• or sell important assets.

The SAFE should therefore consider requiring regular delivery of:

• quarterly financial information;
• cap tables;
• investment updates;
• material litigation reports;
• new financing documentation;
• and notice of proposed exit transactions.

An investor should not discover the state of the company only when conversion occurs.

27. The Cap Table Must Include All Outstanding SAFEs

One of the most serious startup financing mistakes is ignoring SAFE dilution.

Example:

Founders believe they own:

100%.

Startup then signs:

SAFE A — USD 500,000
SAFE B — USD 500,000
SAFE C — USD 1 million.

The company subsequently raises a priced round.

Once all SAFEs convert, founders may discover that their ownership percentage falls dramatically.

This risk is particularly significant with post-money SAFEs, where the implied ownership created by each investment can become economically significant.

Founders should maintain a fully diluted cap table showing:

• issued shares;
• options;
• employee pool;
• SAFEs;
• convertible instruments;
• warrants;
• and other future equity rights.

28. Multiple SAFEs Can Conflict With Each Other

Assume:

Investor A SAFE:

USD 5 million valuation cap.

Investor B SAFE:

USD 4 million valuation cap.

Investor C SAFE:

20% discount.

Investor D SAFE:

MFN.

The company raises Series A.

The conversion calculations can become complex very quickly.

The company must establish:

• which instrument converts first;
• which calculation applies;
• whether MFN changes earlier SAFEs;
• how the option pool is treated;
• whether the valuation is pre-money or post-money;
• and how all instruments affect each other.

This is why standardized documentation alone does not eliminate the need for a proper cap-table model.

29. Pre-Money and Post-Money SAFE Should Not Be Confused

This distinction can dramatically affect founder dilution.

A pre-money SAFE calculates the valuation cap by reference to the company’s value before the relevant investment financing.

A post-money SAFE can make the SAFE investor’s implied ownership more transparent before the subsequent priced financing.

For example:

SAFE investment:

USD 1 million.

Post-money valuation cap:

USD 5 million.

The economic structure can imply approximately:

20% ownership

before taking the later priced round itself into account, depending on the precise capitalization definition.

Founders signing several post-money SAFEs should therefore understand the cumulative dilution.

30. The Definition of “Company Capitalization” Is Critical

SAFE mathematics depends on the denominator.

Does company capitalization include:

• issued founder shares?
• issued investor shares?
• employee options?
• unallocated option pool?
• other SAFEs?
• convertible notes?
• warrants?

Changing one definition can materially change the number of shares the investor receives.

The agreement should not use a foreign template without verifying whether its capitalization definitions make sense within the Turkish company’s actual share structure.

31. Employee Option Pools Can Cause Unexpected Dilution

Suppose investors require the company to create a:

10% ESOP pool

before Series A.

Who bears this dilution?

Founders?

SAFE investors?

The incoming Series A investor?

The answer depends on the documents and conversion formula.

A SAFE negotiated without considering the future employee pool can produce an ownership result materially different from what the founders expected.

32. What Happens if Another SAFE Gets Better Terms?

This is where MFN protection becomes relevant.

Suppose Investor A signs:

Valuation Cap:

USD 8 million.

Three months later the company’s financial position deteriorates.

Investor B receives:

USD 5 million valuation cap.

Investor A may believe that accepting earlier risk should not place it in a worse position.

An MFN provision may allow Investor A to adopt the more favorable later terms.

However, the agreement should determine whether MFN applies to:

• valuation cap;
• discount;
• governance;
• information rights;
• liquidity rights;
• or every commercial provision.

33. Can a Foreign Investor Use a SAFE to Invest in a Turkish Startup?

Generally, foreign investors may invest in Turkish companies under the same general framework applicable to domestic investors, subject to sector-specific restrictions.

Türkiye’s foreign investment regime is based on equal treatment, and international investors may establish or invest in Turkish company forms recognized by the Turkish Commercial Code.

Therefore, the investor’s foreign nationality does not itself prevent a SAFE-type transaction.

The more important issues are:

• transaction structure;
• company form;
• source and documentation of the investment funds;
• future share issuance;
• foreign investor corporate documents;
• tax treatment;
• and regulatory restrictions applicable to the startup’s sector.

34. Foreign Investment Documents Should Be Prepared Early

If the SAFE converts and the investor becomes a shareholder, foreign corporate documents may be required.

For a foreign corporate investor, Turkish procedures may require documents establishing matters such as:

• legal existence;
• authorized representatives;
• corporate approvals;
• and powers of attorney.

Official Invest in Türkiye guidance explains that relevant foreign corporate documents issued abroad may need notarization and apostille or consular legalization, followed by official Turkish translation and notarization, depending on the procedure.

These requirements should be anticipated before the conversion closing.

35. The SAFE Should Specify Who Pays Conversion Expenses

Future conversion can involve:

• lawyers;
• accountants;
• notary costs;
• registry expenses;
• translations;
• apostilles;
• banking expenses;
• and corporate documentation.

The agreement should determine whether these costs are paid by:

• the startup;
• investor;
• founders;
• or each party individually.

This appears minor during a USD 5 million investment but can become contentious in a USD 50,000 angel SAFE.

36. Governing Law Should Be Chosen Carefully

A foreign investor may propose:

Delaware law SAFE.

But the target company is Turkish.

Even if the SAFE contract is governed by foreign law, mandatory Turkish corporate law will remain relevant to matters such as:

• issuance of Turkish shares;
• capital increases;
• Articles of Association;
• shareholder rights;
• corporate resolutions;
• and transfer formalities.

Choosing foreign law does not eliminate Turkish company law.

This can produce a dangerous situation:

The contract says conversion has automatically occurred.

Turkish corporate records say the investor is not a shareholder.

For investments directly into Turkish companies, governing law and corporate implementation should therefore be designed together.

37. Arbitration Can Be Considered for SAFE Disputes

Cross-border investors may prefer arbitration for contractual disputes.

The SAFE can potentially specify:

• arbitration institution;
• seat;
• language;
• number of arbitrators;
• governing law;
• and interim relief mechanisms.

However, the parties should distinguish between:

contractual claims

and

corporate actions requiring company organs to act.

A tribunal deciding that the startup breached the SAFE does not necessarily mean that every corporate act required for issuing shares can simply be bypassed.

The remedy structure should therefore be considered when the agreement is drafted.

38. Damages May Not Be an Adequate Remedy

Suppose the investor entered the SAFE because it expected:

10% of a startup.

The company becomes extremely successful.

Its valuation reaches:

USD 100 million.

Founders refuse to complete conversion.

The investor does not merely want its USD 500,000 back.

It wants the equity that may now be worth:

USD 10 million.

This illustrates why a SAFE should not rely exclusively on a general damages clause.

The transaction should include practical mechanisms designed to ensure actual conversion.

39. Contractual Penalties Can Be Considered

One potential protection is a contractual penalty for failure to perform agreed conversion obligations.

For example, a penalty may arise if shareholders:

• refuse to convene the required meeting;
• vote against a contractually promised capital increase;
• refuse an agreed share transfer;
• or deliberately obstruct conversion.

Recent Turkish SAFE analysis identifies contractual penalty mechanisms as one possible method of reducing non-performance risk.

However, penalty clauses should be drafted proportionately and in accordance with Turkish contract-law principles.

40. Founders’ Personal Undertakings Can Be More Important Than the SAFE Label

A foreign investor should not focus excessively on whether the document is called:

SAFE

Convertible Agreement

Future Equity Agreement

or

Investment Agreement.

The more important question is what happens when conversion day arrives.

A robust structure may require founders to undertake that they will:

• attend meetings;
• vote for conversion;
• support the capital increase;
• waive specified rights where legally possible;
• sign corporate documents;
• and, where agreed, transfer personal shares if the company-level issuance cannot be implemented.

In Türkiye, the enforceability architecture can be more important than the name of the financing instrument.

SAFE vs Immediate Equity Investment

A foreign investor should compare SAFE financing with an ordinary priced equity round.

Immediate Equity Investment

Investor immediately receives shares.

Advantages:

• shareholder status is clear;
• voting rights begin immediately;
• cap table is finalized;
• governance rights become operational.

Disadvantages:

• valuation must be negotiated now;
• transaction documents may be longer;
• due diligence may take more time;
• Articles and corporate structure may need immediate amendment.

SAFE Investment

Investor provides money now but receives equity later.

Advantages:

• valuation can be postponed;
• faster seed financing;
• fewer economic terms may need immediate negotiation;
• useful for bridge rounds.

Disadvantages:

• investor is not immediately a shareholder;
• conversion execution risk exists;
• future dilution can be difficult to model;
• Turkish corporate procedures remain necessary;
• several SAFEs can create cap-table complexity.

Neither structure is automatically better.

The correct choice depends on the company and investment stage.

SAFE vs Convertible Loan

SAFE

Typically:

• equity-oriented;
• no ordinary maturity;
• no ordinary interest;
• no routine repayment right.

Convertible Loan

Typically:

• investor is creditor;
• maturity exists;
• interest may accrue;
• repayment rights may exist;
• conversion occurs under agreed conditions.

The investor should decide whether it wants:

creditor protection

or

pure startup equity exposure.

Trying to create both simultaneously can produce a legally unclear instrument.

Practical Example: Foreign SAFE Investment Into a Turkish Startup

Assume:

Turkish AI startup incorporated as A.Ş.

Founders:

Founder A — 60%

Founder B — 40%.

German Investor proposes:

EUR 500,000 SAFE.

Economic terms:

Post-money valuation cap:

EUR 5 million

Discount:

20%

Qualified Financing:

Minimum EUR 2 million new equity round.

Liquidity Event:

Sale of more than 50% of company or substantially all assets.

The transaction structure could address:

Investment

Investor transfers EUR 500,000 under the future equity agreement.

Conversion

Upon Qualified Financing, investor becomes entitled to newly issued shares based on the more favorable of:

• valuation cap; or
• discount.

Shareholder Undertakings

Both founders agree to support the required corporate resolutions.

Pre-Emption

Founders undertake to take the actions legally required to permit the SAFE investor’s subscription.

Backup

If agreed corporate conversion cannot be completed, founders provide a separately structured share-transfer mechanism.

Information Rights

Investor receives quarterly financial and cap-table information.

New SAFEs

Company must notify Investor before issuing additional future equity instruments.

MFN

Investor may benefit from specified more favorable future SAFE terms.

Liquidity Event

Investor receives the contractually defined liquidity amount if the company is sold before conversion.

Dissolution

Investor’s treatment is defined subject to mandatory insolvency rules.

Future SHA

Upon conversion, investor signs or accedes to the Shareholders’ Agreement applicable to the priced round.

This is considerably safer than simply downloading a two-page U.S. SAFE and replacing:

“Delaware”

with

“Türkiye.”

Common SAFE Mistakes in Türkiye

Foreign investors and Turkish founders frequently risk making the following mistakes:

1. Using a U.S. SAFE without Turkish-law adaptation.
2. Assuming conversion into Turkish shares occurs automatically.
3. Failing to make founders or key shareholders parties to the conversion undertakings.
4. Ignoring existing shareholders’ pre-emption rights.
5. Failing to plan the required capital increase.
6. Using an unclear valuation cap.
7. Failing to distinguish pre-money and post-money valuation.
8. Ignoring other outstanding SAFEs and convertible instruments.
9. Failing to model the fully diluted cap table.
10. Ignoring employee option-pool dilution.
11. Failing to define Qualified Financing.
12. Failing to define what happens if the next funding round never occurs.
13. Failing to regulate a company sale before conversion.
14. Failing to address liquidation.
15. Assuming SAFE investors automatically have shareholder voting rights.
16. Failing to give the investor contractual information rights before conversion.
17. Ignoring founder share-transfer backup mechanisms.
18. Failing to coordinate accounting treatment with the legal structure.
19. Choosing foreign governing law without considering mandatory Turkish company law.
20. Failing to prepare foreign-investor corporate documentation before conversion.

Frequently Asked Questions

Are SAFE agreements legal in Türkiye?

A SAFE-style future equity agreement may be structured contractually under Turkish law, but Türkiye does not have a dedicated statutory SAFE regime comparable to the standard U.S. mechanism. Turkish contract and company law must therefore be analysed together.

Does signing a SAFE make the investor a shareholder immediately?

Generally, no.

The investor normally receives a contractual future equity right and becomes a shareholder only after the relevant share issuance or transfer is legally completed.

Can a SAFE automatically convert into shares of a Turkish company?

A U.S.-style self-executing conversion should not simply be assumed to work under Turkish law.

The relevant Turkish corporate procedures, including the capital increase or share-transfer mechanism, must still be implemented.

Can a foreign investor sign a SAFE with a Turkish startup?

Yes, a foreign investment can generally be structured under Türkiye’s foreign investment framework, subject to applicable corporate and sector-specific rules. International investors generally have the same rights and liabilities as domestic investors.

Is a SAFE a debt?

A traditional SAFE is normally designed not to function as ordinary debt because it generally has no maturity date and no interest obligation.

Its exact characterization under Turkish law depends on the contractual terms.

Does a SAFE pay interest?

Traditional SAFEs normally do not.

If the agreement includes interest, maturity and repayment rights, the instrument begins to resemble convertible debt and should be analysed accordingly.

What is a valuation cap?

A valuation cap limits the valuation used when calculating the investor’s future shares.

It rewards the SAFE investor for investing before a later, higher-priced funding round.

What is a discount?

A discount allows the SAFE investor to purchase shares at a lower effective price than investors in the future priced round.

Can a SAFE have both a cap and a discount?

Yes.

The agreement can provide that the conversion method producing the more favorable result for the investor applies.

Can conditional capital increase be used for SAFEs?

Turkish Commercial Code Article 463 permits conditional capital increases for specified creditors and employees using rights associated with newly issued bonds or similar debt instruments.

Whether a particular SAFE can be structured through this mechanism requires careful analysis because a traditional SAFE is intentionally different from ordinary debt. Recent Turkish commentary discusses conditional capital increase as a potential but technically constrained route.

What is the main risk for a SAFE investor in Türkiye?

One of the principal risks is conversion execution risk.

The investor may have a contractual right to future equity while corporate decisions remain necessary before the investor legally becomes a shareholder.

Should founders also sign the SAFE?

In many Turkish structures, having founders or controlling shareholders provide appropriate voting, cooperation or share-transfer undertakings can materially reduce conversion risk.

The correct structure depends on the cap table and company form.

Can a Turkish Ltd. Şti. use a SAFE?

Potentially, but limited company share-transfer formalities and corporate approval requirements can make future equity structures less flexible.

A transaction-specific Turkish-law review is particularly important.

Is an A.Ş. generally more suitable for venture financing?

Joint stock companies are frequently preferred for institutional and venture investment because of their share structure, governance and greater share-transfer flexibility.

The appropriate company type should nevertheless be selected according to the startup’s actual circumstances.

Conclusion

SAFE agreements can be useful for Turkish startups seeking fast early-stage financing without immediately negotiating a final company valuation.

They can be particularly attractive for:

• pre-seed rounds;
• seed investments;
• angel investments;
• bridge financing;
• and foreign venture investment.

However, a SAFE should not be viewed as a magic document that automatically produces Turkish company shares.

The central Turkish-law issue is the distinction between:

a contractual right to receive future equity

and

the corporate process required to legally issue or transfer those shares.

Türkiye’s official startup ecosystem recognizes SAFE as an established startup-financing concept, but Turkish corporate law still requires investment structures to operate through the mechanisms provided by the Turkish Commercial Code.

A properly structured Turkish SAFE should therefore answer at least the following questions:

What event triggers conversion?

How is the number of shares calculated?

Is the valuation cap pre-money or post-money?

Does a discount apply?

What happens to existing shareholders’ pre-emption rights?

Who is obligated to vote for the capital increase?

What happens if shareholders refuse to cooperate?

Is there a founder share-transfer backup?

What happens if the company is sold before conversion?

What happens if no financing round ever occurs?

What happens if the startup fails?

What rights does the investor have before becoming a shareholder?

How do other SAFEs affect dilution?

Which Shareholders’ Agreement will the investor join after conversion?

For foreign investors, the safest approach is therefore not to ask:

“Can we use a SAFE in Türkiye?”

but rather:

“How should we restructure the SAFE so that its economic result can actually be implemented under Turkish law?”

That distinction is critical.

A two-page agreement can be simple.

Making sure the investor actually receives the promised shares years later is the difficult part.

This article provides general information regarding Turkish corporate and investment law and does not constitute legal, financial, accounting or tax advice. SAFE and future-equity structures should be reviewed according to the company’s legal form, Articles of Association, existing cap table, investor profile, conversion mechanics, sector and the specific terms of the proposed financing.