In India, to comply with existing laws a variation of SAFE has emerged called the iSAFE notes (Indian Simple Agreement for Future Equity) notes. iSAFE (or India SAFE) was introduced by an Indian VC firm 100X.VC, as an adaptation of the SAFE document originally introduced by US-based fund Y-Combinator.

To comply with Indian laws, iSAFE note takes the legal form of compulsorily convertible preference shares (CCPS). The notes automatically convert into equity shares either on occurrence on specified liquidity events such as next pricing/valuation round, dissolution, merger/acquisition, etc., or at the end of 3 years from the date of the issue, whichever is earlier.

Here are some of the major differences between SAFE and iSAFE -

⇨ SAFE could be either pre-money or post-money. iSAFE is post-money (Refer to the Day-13 post for more details on pre-money and post-money)

⇨ iSAFE has an expiry of 3 years whereas SAFE has no expiry date.

⇨ SAFE has no interest or dividend. Since the Companies Act, 2013 classifies all share capital as either equity or preference, iSAFE notes issued in India are classified as preference shares and hence carry a non-cumulative dividend @ 0.0001%.

⇨ Because SAFEs aren’t debt and also aren’t equity, they often don’t appear directly on a cap table. Since iSAFE notes are considered preference shares, they do appear on the cap table as CCPS.