iSAFE vs SAFE: why the Indian version is a different animal

The Y Combinator SAFE is beloved because it defers everything: no valuation, no shares issued, just a contract that converts later. Founders in India often assume they can use the same document. They cannot — not as-is.

Indian company law does not have a "neither debt nor equity" bucket. Money coming into a company against future shares must take the form of a recognised security. So the Indian adaptation — the iSAFE — is legally wrapped as Compulsorily Convertible Preference Shares (or sometimes CCDs) carrying SAFE-style economics: a valuation cap, a discount, MFN protection.

That legal wrapper has real consequences. Issuing an iSAFE IS an allotment: private placement procedure, PAS-3 within 15 days, valuation requirements, stamp duty. If the investor is foreign, FEMA reporting (FC-GPR within 30 days) applies at issue — not at conversion. The "we’ll do the paperwork later" mental model of the US SAFE is exactly wrong here.

None of this makes iSAFEs bad — they are still fast and founder-friendly. But they are securities from day one, and the compliance clock starts at issue.