CARE vs SAFE: Four Early Stage Funding Approaches Compared

CARE and SAFE documents solve a similar funding problem: a company wants to raise capital before its next priced equity round. The labels can nevertheless obscure material differences. CARE is a VIMA Singapore law model. SAFE is the name Y Combinator gave its Simple Agreement for Future Equity. Documents adapted from YC's forms are also often described as SAFEs, but that description does not establish their terms.

There is therefore no authoritative generic SAFE form separate from YC's published documents. In this article, “adapted SAFE” means a document derived from or resembling a YC SAFE but changed by its drafter. It must be read on its own terms. The useful comparison is between CARE, adapted SAFE documents, YC's international post money SAFE for Singapore companies and YC's post money SAFE forms for US companies.

The four approaches

VIMA CARE

CARE is a Singapore law model in the VIMA 2.0 suite. It is configurable and can include a qualifying financing threshold, valuation cap, discount, long stop date and an agreed interest provision. Our companion guide explains the CARE mechanics in detail. Depending on the alternatives selected, the long stop mechanism may lead to conversion or repayment.

A non-YC or adapted SAFE

A document described generically as a SAFE may borrow from a YC form, but the label does not guarantee YC terms. It may use different governing law, maturity treatment, conversion triggers, investor protections or priority provisions. Its effect can only be established by reviewing the actual document. Calling it a SAFE does not make it interest free, maturity free or suitable for a Singapore issuer.

YC SAFE for Singapore

YC publishes an international post money SAFE for Singapore companies. It adapts the SAFE architecture for a Singapore issuer and states that no interest accrues. It does not set a maturity date. Its post money framework is designed to make the ownership represented by the SAFE calculable by reference to the form's definition of Company Capitalization immediately before the equity financing. That percentage is not a guarantee of ownership after the priced round. New money in the round, an option pool increase excluded from the denominator and later issuances can dilute the holder.

YC SAFE for the US

YC's current US forms also use post money mechanics. For US companies, YC publishes separate post money forms using a valuation cap, a discount or a most favoured nation provision. The standard forms bear no interest and have no maturity date. YC presents them as US forms, commonly used for Delaware corporations, and they should not be transplanted into a Singapore financing without local analysis. Our focused guide compares the YC Singapore and US SAFE forms.

Conversion economics

CARE can use valuation cap and discount mechanics and a qualifying financing threshold according to its selected terms. The completed document must be checked to establish how any stated discount percentage is defined. YC's US suite provides distinct variants, while each executed YC form contains its own defined post money conversion mechanics. An adapted SAFE can reproduce either approach or use different mechanics entirely.

The capitalisation definition deserves close attention in every case. Treatment of issued shares, promised options, the unallocated option pool and other converting instruments affects the price and number of shares. Identical headline caps do not ensure identical dilution, and a valuation cap is not a ceiling on the valuation of the next priced round. Where a round involves several individual investors, the instrument choice should also be considered alongside Angel SPV and cap table structuring.

Interest, maturity and the long stop

The published YC US post money forms and YC Singapore post money form state that no interest accrues and do not contain a maturity date. CARE can instead include an agreed interest provision and a long stop date. The CARE long stop creates a defined decision point if an earlier trigger has not occurred, with the result governed by the alternatives selected in the agreement.

An adapted SAFE has no reliable answer on either point. If it departs from the relevant YC form, the document must be checked for interest, maturity, repayment and investor election rights. The word SAFE alone cannot answer those questions.

Liquidity and dissolution

Under YC's published US post money valuation cap form, a holder facing a liquidity event is generally entitled to the greater of the purchase amount, called the Cash-Out Amount, and the as converted proceeds, called the Conversion Amount, subject to the priority provisions. On dissolution, the form generally provides for the Cash-Out Amount, subject to available assets.

The Cash-Out Amount ranks behind creditor claims and outstanding indebtedness, alongside Cash-Out Amounts on other SAFEs and liquidation preferences on preferred stock, and ahead of common stock. A Conversion Amount instead ranks alongside common stock and others receiving an as converted amount. The Singapore YC form must be read directly for its own liquidity, dissolution, priority and Singapore implementation provisions; the US waterfall should not be assumed to apply word for word.

CARE uses its own selected exit and dissolution provisions. An adapted SAFE may differ from all three published models. None of these labels alone creates security over company assets. Founders considering debt rather than future equity should separately review the covenants and repayment risks described in our guide to venture debt in APAC.

Singapore corporate implementation

Both CARE and a Singapore SAFE require local corporate implementation. Under section 161 of the Companies Act, directors generally need the company's prior approval in general meeting before allotting shares, subject to statutory exceptions. The constitution, pre-emption rights, reserved matters and other investor documents may require further approvals or waivers.

ACRA states that an allotment by a Singapore private company takes effect when the electronic register of members is updated after the allotment filing, and requires the return of allotment to be filed within 14 days of the allotment. Using a short form instrument does not remove these implementation requirements.

How to choose

CARE may suit parties who want a Singapore law VIMA starting point and a configurable long stop position. A YC Singapore SAFE may suit parties who want closer alignment with YC's post money architecture. A US YC SAFE is designed for a US issuer. An adapted SAFE may be appropriate, but only after its departures and governing law have been identified.

The choice is not a verdict that one instrument is invariably more founder friendly or investor friendly. Founders should model the conversion at several round valuations, include every option and convertible instrument, and test the exit and no-round outcomes. The economic terms and capitalisation definition matter more than the label.

For a focused explanation of the VIMA instrument, read How Singapore CARE Funding Works. Our transactional services overview explains how we support funding documentation and corporate approvals.

Conclusion

CARE, adapted SAFE documents and the YC Singapore and US forms address similar timing problems through different contracts. CARE should not be described as a YC SAFE merely because both may convert into future equity. CARE offers a configurable Singapore law framework. YC's published SAFE forms provide a more standardised post money architecture without interest or maturity. A document described only as a SAFE may follow neither model.

Primary references reviewed for this article include the VIMA CARE materials, Y Combinator's SAFE documents and user guide, the Singapore Companies Act 1967 and ACRA allotment guidance. Forms and guidance can change. This article is general information, not legal, investment, accounting or tax advice.