SAFE Note vs Convertible Note in India: Which One Should You Use?
India's startup ecosystem borrowed these instruments from Silicon Valley without fully understanding which one was designed for which situation. Most founders choose the wrong one.
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“A SAFE is not a loan — it has no interest rate, no maturity date, and no repayment obligation. A convertible note is debt that converts. In India's FEMA-regulated environment, this distinction affects how you report the instrument to the RBI.”
“The MFN (Most Favored Nation) clause on SAFEs is the single most negotiated provision in Indian pre-seed deals — and most founders don't know what it means until it bites them in their Series A cap table.”
“India's CCPS (Compulsorily Convertible Preference Shares) structure is often more practical than either SAFE or convertible note for regulatory compliance — your lawyer should present all three options, not just what the term sheet says.”
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Amit Tyagi
Founder, AletheiaAI & GP, Fitoor Capital
Veteran of India's startup ecosystem. Writing about fundraising, investor psychology, and what it takes to build fundable startups in India.
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