SAFE Notes in the Netherlands: Do They Really Work?
SAFE notes are widely used in US startup financing. They are designed to be simple, founder-friendly instruments that convert into equity in a future financing round. In Dutch venture capital practice, however, US-style SAFE notes cannot simply be copied into a Dutch BV structure without careful adaptation.
The Dutch BV is flexible, but share issuances and share transfers are subject to Dutch corporate law and often require notarial involvement. This means that a SAFE-style instrument must be drafted with Dutch implementation mechanics in mind.
For broader Dutch VC structuring, see Raising Venture Capital in a Dutch BV.
What is a SAFE?
A SAFE is a contractual investment instrument. The investor provides funding now and receives the right to obtain shares in a future equity financing, usually based on a discount, valuation cap or both.
Unlike a traditional convertible loan, a SAFE is often not structured as debt and may not have interest or a fixed maturity date. That simplicity is one of the reasons why SAFEs are popular in early-stage financing.
However, the legal environment in which SAFEs were developed is not the same as Dutch BV law.
Dutch BV implementation
In a Dutch BV, new shares are generally issued through a notarial deed. Existing shareholders may have pre-emption rights unless waived or excluded. The articles of association may need to permit the relevant class of shares and the agreed economic rights.
This means that a SAFE cannot automatically “become shares” without the necessary Dutch corporate actions. The conversion mechanics must be supported by shareholder resolutions, notarial execution and, where relevant, amendments to the articles.
If this is not properly documented, the investor may have a contractual claim but no automatic shareholding.
Key drafting points
A Dutch SAFE-style instrument should clearly address the conversion event, valuation cap, discount, type of shares, shareholder approvals, pre-emption rights, information rights and consequences if the next financing round does not occur.
It should also explain what happens on an exit, insolvency or dissolution before conversion. These scenarios are often underestimated in early-stage documents.
Where foreign investors are involved, the documentation should also avoid ambiguity between US-style terminology and Dutch corporate law concepts.
Convertible loan as an alternative
In the Netherlands, convertible loans are often used as a more familiar alternative. A convertible loan can provide more detailed mechanics on maturity, interest, conversion, repayment and default.
That does not mean a SAFE-style instrument cannot work. It means the document should be adapted to Dutch law and should not rely on assumptions from US practice.
For more on alternative early-stage instruments, see Alternative Simple Financing Instruments for Early-Stage Investments.
Practical takeaway
SAFE notes can be used in Dutch startup financing, but they need Dutch-law adaptation. The key issue is not the commercial idea, but the legal implementation.
Founders and investors should make sure that conversion into shares can actually be executed under the company’s articles, shareholder approvals and Dutch notarial requirements.
About Dirk de Waard
Dirk de Waard is a Dutch corporate lawyer focusing on venture capital, M&A and growth company transactions. He advises founders, startups, scaleups, angel investors and venture capital funds on Dutch financing rounds, governance arrangements and shareholder structures.
Questions about SAFE notes, convertible instruments or Dutch startup financing? Send an email to dirk.dewaard@viottalaw.com.
