The SAFE as a new seed financing instrument in the Austrian startup landscape

Thursday 31 March 2022

Sarah Wared

Wolf Theiss, Vienna


The simple agreement for future equity (SAFE) is a financing instrument that can be used to raise capital in the seed financing rounds of startup companies. A SAFE can be considered a more startup and founder-friendly alternative to convertible debt.

Commonly, SAFEs are based on post-money valuation. Since its introduction, the SAFE has been used by many startups, particularly in the US. In Austria, using SAFEs as an instrument for early-stage financing is still quite novel. Therefore, the Austrian startup-finance ecosystem does not yet have standard form documents.

Structure of an Austrian SAFE

When structuring a SAFE under Austrian law, the structure of such investments with respect to the funding of startups in the form of an Austrian limited liability company vary. Nonetheless, several aspects need to be considered, and specific legal requirements under Austrian law must be respected when structuring a SAFE. In particular, the SAFE structure depends on tax aspects which need to be carefully assessed and reflected in the SAFE.

From an Austrian law perspective, a SAFE is an investment agreement between a startup, its shareholders (the founders) and an investor. It entitles the investor to the right to receive equity of the startup company upon the occurrence of certain triggering events, such as a future equity financing: ie, the investor does not acquire the position of a shareholder by executing the SAFE.

Commonly, the conversion of the SAFE is executed by way of an ordinary share capital increase, in which the SAFE holder is admitted to subscribe for the capital increase to the extent agreed in the SAFE. In the event of an ordinary share capital increase, all shareholders holding a share of the company at the time of the conversion agree to waive their statutory subscription rights without consideration with respect to the shares issued to the SAFE holder, and to pass all resolutions necessary to implement the issuance of the new shares to the SAFE holder.  

Normally, the price of the shares that the SAFE holders receive on conversion is lower than the price of the shares issued to other investors in connection with equity financing, based on a discount rate or a post-money valuation cap (or both).

SAFEs may have similar conversion parameters but do not contain debt elements of bridge notes. Typically, a SAFE has no long stop or maturity date: SAFEs remain outstanding until a conversion event, liquidation event or dissolution event.

Further, the SAFE amount does not bear any interest. Typically, SAFE holders receive a right to convert their SAFEs into equity at a lower price than the investors in the subsequent financing (based either on the discount or post-money valuation cap in their SAFEs). They also receive the right to receive a portion of the proceeds in the case of a liquidation event or a dissolution event, subject to certain (mandatory legal) requirements and to the extent the proceeds are available for distribution.

Usually, a SAFE does not grant the investor any repayment claims and qualifies as equity, whereas a convertible note is repayable and commonly qualifies as debt investment that only turns into equity upon conversion (in the course of the equity financing).

SAFEs often contain certain representations and warranties from the existing shareholders and/or the company (eg title and ownership, intellectual property, material agreements and compliance). The scope, as well as the effective date of such representation and warranties, should be determined in the SAFE.

Usually, SAFE holders (in particular the lead investors) request the establishment of an advisory board or a similar body in which the lead investor is a member. This body usually possesses information, consent or veto rights with respect to certain business and/or corporate measures. This request is in many cases justified, as the SAFE holder is not a shareholder of the company and therefore does not have any voting rights in the company until conversion of their investment.

Generally, any agreements on the transfer of shares of a limited liability company must be executed in the form of a notarial deed. There is no case law from the Austrian Supreme Court on the question of whether SAFEs require a notarial deed as well. To avoid the risk that the conversion of the SAFE into equity is not enforceable, it is recommended that the parties to the SAFE execute the SAFE in the form of a notarial deed.


In addition to convertible loans, a SAFE is a startup and founder-friendly financing instrument which has now arrived in Austria.

The startup company receives the funds within a short period following the execution of the SAFE, and the investor receives their equity stake at a later stage – the parties involved are not required to determine the valuation of the company prior to the execution of the SAFE. Based on our experience, the importance of SAFEs will grow in the Austrian startup landscape.