SAFE Notes in the Netherlands: What US Investors Get Wrong

Why US SAFE concepts do not automatically work in Dutch BV financing structures

US investors often assume that a SAFE can be used for a Dutch startup in the same way as for a Delaware corporation. That assumption is risky. A Dutch BV can use SAFE-style or convertible instruments, but the legal mechanics are different. Future share issuance, shareholder approvals, notarial execution, pre-emption rights, share classes, valuation mechanics and conversion formulas all need Dutch implementation.

The question is not whether founders and investors can agree on a simple instrument. They can. The question is whether the instrument will actually convert cleanly when the next financing round, exit or restructuring occurs.

This article is part of Viotta’s US VC Terms & Dutch BV Structures Insights series and should be read together with the broader article SAFE Notes in the Netherlands: Do They Really Work?.

A US SAFE does not automatically issue Dutch shares

In a Delaware-style context, investors often think of a SAFE as a simple pre-equity instrument that converts into shares when the next financing round occurs. In a Dutch BV, the actual issuance of shares requires corporate approvals and notarial implementation.

A contract can create an obligation to cooperate with conversion. It does not itself create Dutch BV shares. At conversion, the company may still need shareholder or board approvals, notarial deeds, amended articles and compliance with existing shareholder rights.

This is the first misunderstanding. The economic agreement and the share issuance mechanics are separate steps.

Valuation caps and discounts need Dutch drafting

US SAFE documents often rely on valuation caps, discounts or a combination of both. These concepts can be used, but they must be translated into a clear Dutch conversion formula.

The formula should explain how the conversion price is calculated, whether the calculation is pre-money or post-money, how the option pool is treated, whether existing convertibles are included on a fully diluted basis and how different share classes are handled.

If this is not clear, the instrument may become a cap table dispute at the exact moment the company needs to close its next round.

Investor rights before conversion

A SAFE investor is usually not a shareholder before conversion. That means the investor does not automatically have voting rights, dividend rights, meeting rights or statutory shareholder rights in the Dutch BV.

US investors sometimes expect information rights, major investor rights or protective provisions to apply immediately. If that is intended, it must be contractually documented.

For Dutch founders, this is also important. Giving too many pre-conversion rights can make a simple instrument behave like a shadow shareholders’ agreement. Giving no rights may be unacceptable to investors writing a larger cheque.

Future financing and shareholder approvals

The real test of a SAFE-style instrument is the next financing round. The instrument should specify what qualifies as an equity financing, what happens if the financing is below a threshold, whether conversion is automatic or optional and what documents the investor must sign on conversion.

In a Dutch BV, the company must also consider existing pre-emption rights, shareholder consent rights, investor vetoes and statutory mechanics. If existing shareholders can block or delay the share issuance, the instrument is less simple than it appears.

US investors should therefore ask how conversion will be implemented, not only what discount or valuation cap applies.

Exit, dissolution and no qualified financing

A good Dutch SAFE-style instrument should address scenarios other than a priced round. What happens if the company is sold before conversion? What happens if there is no qualified financing for a long period? What happens on dissolution, insolvency or restructuring?

US templates may not fully match Dutch BV practice on these points. If the fallback mechanics are unclear, the investor and company may disagree on whether the SAFE repays, converts, participates in exit proceeds or expires.

These provisions matter most when the company is under pressure. That is exactly when ambiguity is most damaging.

Convertible loan or Dutch-law SAFE-style instrument?

In many Dutch BV situations, a convertible loan agreement may be more practical than importing a US SAFE template. A convertible loan can include interest, maturity, repayment mechanics, events of default and conversion rights. That may be easier to integrate with Dutch law, investor expectations and future financing rounds.

A Dutch-law SAFE-style instrument can also work, but only if it is drafted around Dutch BV mechanics rather than copied from a US form.

The choice should be based on the company’s stage, investor profile, expected next round, tax input and cap table impact.

Practical conclusion

US SAFE concepts can be useful in Dutch startup financing, but they do not automatically work in a Dutch BV. The main issues are conversion mechanics, shareholder approvals, notarial share issuance, valuation formulas, investor rights before conversion and fallback scenarios.

For US investors, the key is to ask whether the instrument is enforceable and convertible under Dutch law. For founders, the key is to avoid simple-looking instruments that create complex cap table problems later.

FAQ

Can a Dutch BV use a SAFE?
Yes, but it should be adapted to Dutch BV mechanics. A US template should not be used without Dutch legal review.

Does a SAFE investor become a shareholder immediately?
Usually not. Before conversion, the investor typically has a contractual claim, not Dutch BV shares.

Is a convertible loan better than a SAFE in the Netherlands?
Often it can be more practical, especially where repayment, maturity, default and conversion mechanics need to be clearly documented.

About Dirk de Waard

Dirk de Waard is a Dutch corporate and M&A lawyer, partner at Venture Lawyers in Amsterdam, and advises founders, startups, scale-ups, angel investors, US investors and international counsel on Dutch SAFE-style instruments, convertible loans, Dutch BV financing rounds and investor rights.

Using SAFE-style instruments in a Dutch BV?

A SAFE-style instrument can be useful, but only if conversion, valuation mechanics, shareholder approvals and future share issuance mechanics work under Dutch law. US templates should be translated into Dutch BV implementation, not copied.

Dirk de Waard advises founders, Dutch startups and US investors on SAFE-style instruments, convertible loans and Dutch BV financing mechanics. Contact dirk.dewaard@viottalaw.com to review whether a SAFE, convertible loan or priced equity round is the right structure.