Raising capital changes your company permanently. The instrument you use determines who owns what, what rights investors hold, and how much flexibility you keep for the next round. In Singapore's startup ecosystem, three instruments dominate — SAFEs, convertible notes, and priced equity rounds — and each suits a different stage and situation.
SAFE (Simple Agreement for Future Equity)
Created by Y Combinator, a SAFE is a right to receive equity in a future priced round, triggered by a qualifying financing. It is not a loan: no interest, no maturity date, and no repayment obligation. This founder-friendly simplicity makes SAFEs popular for early pre-seed and seed raises.
*Key terms:* valuation cap (the maximum valuation at which the SAFE converts), discount rate (a reduction to the next round's price), most-favoured-nation (MFN) clause, and pro-rata rights. Post-money SAFEs make dilution easier to calculate but can dilute founders more than expected when stacked.
Convertible Note
A convertible note is debt that converts to equity at a future round. Because it is a loan, it carries an interest rate (commonly 5–8%) and a maturity date (often 12–24 months). If it hasn't converted by maturity, the investor can, in principle, demand repayment — a risk SAFEs avoid. Notes suit investors who want downside protection and a defined timeline.
*Key terms:* valuation cap, discount, interest rate, maturity date, and conversion mechanics.
Priced Equity Round (Seed, Series A, B…)
A priced round issues shares at an agreed valuation now. It is more complex and costly (legal fees can run from S$15,000 to well over S$50,000) but delivers certainty on ownership, governance, and investor rights from day one. It's the standard once cheques and investor expectations grow.
*Key documents:* term sheet, share subscription agreement, shareholders' agreement, and an amended constitution.
Instrument Comparison
| Factor | SAFE | Convertible Note | Priced Round |
|---|---|---|---|
| Legal nature | Equity right | Debt | Equity |
| Interest | No | Yes | No |
| Maturity/repayment | No | Yes | No |
| Valuation set now | No (cap only) | No (cap only) | Yes |
| Complexity & cost | Low | Low–medium | High |
| Typical stage | Pre-seed/seed | Seed/bridge | Series A+ |
Singapore-Specific Considerations
- Accredited Investor rules: Many private placements rely on exemptions under the Securities and Futures Act, so investors often must qualify as Accredited Investors
- Stamp duty: Share transfers (not new issuances) attract 0.2% stamp duty
- Government co-investment: Startup SG Equity can match qualified private investment, improving round economics for deep-tech and tech startups
- No par value: Singapore shares have no par value, simplifying issuance mechanics
Founder Watch-Outs
- Stacking multiple SAFEs with different caps can cause surprise dilution at conversion — model your fully diluted cap table before signing
- A low cap set too early can hurt you more than a slightly higher one at the priced round
- Always reconcile instrument terms with your shareholders' agreement to avoid conflicts
How Gateway of Asia Helps
We help you choose the right instrument for your stage, model the dilution impact on your cap table, and coordinate the corporate secretarial work — resolutions, allotments, and register updates — that every raise ultimately requires.