Raising funds in Thailand with a SAFE

SAFE investments offer similar levels of flexibility when compared to a convertible note, while also addressing some of the more complex issues found with convertible notes.

Much like convertible notes, investors fund the company and receive a SAFE agreement as opposed to upfront equity. The SAFE entitles them to receive future shares in the company, providing the triggering event occurs. Common triggering events include the successful raising of equity capital, an acquisition or an Initial Public Offering.

SAFEs are generally easier and cheaper to utilize than convertible notes, this makes them an attractive option for start up companies looking to generate funds. However, there has been some negative criticism regarding investor protection, or lack of it. The main concern stems from the fact an investor may never receive any equity from their investment, if a triggering event doesn’t occur. This is not the case in relation to convertible notes, should a triggering event not occur here, the investor is still entitled to receive interest payments or even repayment of the investment should the maturity date be reached.

While some investors may be wary of the perceived lack of investor protection when dealing with SAFEs, the flexibility provided for startups seeking funding is an attractive proposition. More and more investors consider SAFEs to be a cost-effective way for startups to raise their early funding rounds and investors to ultimately end up with equity at a decent price.

The Thai CCC however prohibits the offsetting of share price with debts, which prevents investors from directly enforcing the receipt of future shares acquired from SAFEs. As discussed above, the issuance of future shares shall be in line with the permissible mechanism of Thai CCC, i.e. increasing the company’s registered capital by issuing preference shares.