Not as written. The YC SAFE assumes a Delaware corporation and US law. German startups use a convertible loan (Wandeldarlehen) instead: the investor lends money that converts into shares at the next round, usually with a valuation cap and discount, and with qualified subordination so it does not count as debt in insolvency tests.
- The YC SAFE is drafted for Delaware corporations; it does not map onto GmbH share issuance.
- The German equivalent is a convertible loan with conversion at the next priced round.
- Cap and discount work as in a SAFE; interest is often low or nominal.
- Qualified subordination (qualifizierter Rangrücktritt) is standard to avoid over-indebtedness and regulatory issues.
- Signing usually needs no notary; conversion does, as a capital increase.
Why does the SAFE not work for a GmbH?
A SAFE is a contract right to receive shares later under US corporate law. A GmbH cannot simply promise to issue shares at a future date the same way: new shares require a notarised capital increase approved by the shareholders. The SAFE's terms (its definitions, liquidity events and conversion mechanics) were written for Delaware stock and are not tested in German courts. See SAFE vs convertible note vs priced round for how the US instrument works.
How does a German convertible loan work?
- The investor lends an amount to the company.
- At the next qualified financing round, the loan converts into new shares, usually at the lower of a valuation cap or the round price minus a discount.
- If there is no round by a maturity date, the agreement says what happens: conversion at the cap, extension or repayment.
- Existing shareholders commit to vote for the capital increase that makes the conversion possible.
| US post-money SAFE | German convertible loan | |
|---|---|---|
| Legal nature | Contract right to equity | Loan with conversion right |
| Interest | None | Often low or nominal |
| Maturity | None | Usually yes |
| Notary | No | Not at signing; yes at conversion |
| Subordination | Not applicable | Qualified subordination standard |
Why is subordination important?
Because a loan is debt. A young company with a large loan on its balance sheet can look over-indebted, which triggers duties under German insolvency law. A qualified subordination clause ranks the loan behind other creditors, so it is not counted as debt for those tests. Subordination also matters for German banking rules, which restrict taking repayable funds from the public. Use a template your counsel recommends rather than an online sample.
When should you flip instead?
If your pre-seed investors are American and want a SAFE, the cleaner route may be a Delaware parent. Read Delaware flip from Germany and compare structures in Delaware C-Corp vs GmbH. For notary costs at conversion, see notary costs in a German round.
What are typical German convertible loan terms?
| Term | Common approach |
|---|---|
| Interest | Low fixed rate, accrued and converted, not paid in cash |
| Valuation cap | Yes, as in a SAFE |
| Discount | Often 10–25% on the next round price |
| Qualified financing | Minimum new money that triggers conversion |
| Maturity | Often 18–36 months, with conversion or extension options |
| Exit before conversion | Conversion or a multiple of the loan amount |
| Subordination | Qualified subordination |
What do founders need to prepare for conversion?
- A shareholder resolution approving the capital increase.
- Notarial deeds for the resolution and subscriptions.
- An updated shareholder list filed with the register.
- Adjustments to the shareholder agreement so the new shareholders join on agreed terms.
Existing shareholders usually commit, in the loan agreement, to vote for the conversion. Without that commitment, a single shareholder could block it.
What about international investors?
US angels are often unfamiliar with German convertible loans. Provide an English version, explain the notary step at conversion, and compare the terms to a SAFE in a short table. Many investors accept German documents once they understand them; some will still prefer a Delaware structure.
Frequently asked questions
Can I use the YC SAFE for my German GmbH?
Not as written. It is designed for Delaware corporations. German startups usually use a convertible loan with a valuation cap and discount.
What is a Wandeldarlehen?
A convertible loan: the investor lends money that converts into company shares at a later financing round, typically at a capped valuation or a discount.
Does a German convertible loan need a notary?
Usually not when signed. The conversion is a capital increase, which needs a notary.
Why do German convertible loans include subordination?
To keep the loan from counting as debt in insolvency over-indebtedness tests and to address German regulatory restrictions on taking repayable funds.
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Join the waitlist →Sources and further reading. Y Combinator, SAFE documents; §55 GmbHG (capital increase); §19 InsO (over-indebtedness).
Educational material, not legal, tax or investment advice. Rules and figures change; confirm with qualified counsel or a tax adviser in your jurisdiction before acting. Last updated October 6, 2026.