SAFE vs CCD vs priced round: how should you raise your early money?
The instrument follows the entity and the border. A SAFE is fast and founder-friendly, but it is a US-company tool and not a compliant way to take foreign money into an Indian company. A compulsorily convertible debenture (or CCPS) is the FEMA-friendly convertible for investment into an Indian company. A priced round sets the valuation now and issues equity, for a clean cap table when the cheque is large. Where your company sits usually decides which is even available.
CCPS vs CCD vs SAFE, for an Indian startup: a SAFE is off the table for foreign money into the Indian company. A CCD and a CCPS are both equity under FEMA when they are fully, compulsorily and mandatorily convertible, and both need the price or conversion formula fixed at issue. The difference is form. A CCPS is preference share capital with a limited vote; a CCD is a debenture, an instrument evidencing a debt, with no vote until it converts. In an unpriced round the formula still carries a fair-value floor set at issue. A start-up company can also use a convertible note, which FEMA treats as debt until it converts (Master Direction para 2.5).
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The short answer, by situation
Founders reach for the SAFE because it is famous and simple, then discover it does not work for foreign money into their Indian company. Three common patterns:
- Small, fast US pre-seed or bridge into a US C-corp: a SAFE.
- Early money, foreign or domestic, into an Indian company: a CCD or CCPS.
- Larger cheque, investors want defined ownership, valuation is agreeable: a priced round.
SAFE vs CCD vs priced round, side by side
| Dimension | SAFE (US) | CCD / CCPS (India) | Priced round |
|---|---|---|---|
| What it is | Convertible instrument, converts at the next priced round | Compulsorily convertible instrument, treated as equity under FEMA | Equity issued now at an agreed valuation |
| Valuation set | Deferred, via a cap and/or discount | Conversion price or formula set upfront, within pricing rules | Now |
| Entity it fits | US C-corp | Indian Private Limited company | Either |
| Foreign money into India | Not a recognised FDI instrument | Compliant, as it is compulsorily convertible | Compliant if priced per the guidelines |
| Speed and cost | Fastest, cheapest | Moderate; filings and pricing apply | Slowest; diligence and an SHA |
| Investor familiarity | US and global standard | Indian standard for convertibles | Universal |
| Main trap | Using it for foreign investment into an Indian company | Missing the pricing rules or the FC-GPR filing window | Over-negotiating valuation too early |
FEMA pricing rules and filing windows change; the table is a planning aid, not a current-rule citation. Confirm against current law for your facts before you sign.
When a SAFE fits
A SAFE fits a small, fast raise into a US C-corp, usually pre-seed or a bridge, where you want to move quickly and are comfortable deferring the valuation to the next priced round. It is cheap to paper and familiar to US investors. The single most common mistake is trying to use one for foreign investment into an Indian company, where it is not a compliant FDI instrument, and the round has to be unwound and redone.
When a CCD or CCPS fits
For early money into an Indian company, foreign or domestic, a compulsorily convertible instrument is the route. Because it must convert into equity, FEMA treats it as equity and permits it under the automatic route for most sectors. The conversion price or formula is set upfront within the pricing guidelines, and the FC-GPR filing has to be made on time. A Private Limited company is the vehicle that can issue these; an LLP cannot.
CCPS vs CCD: what actually differs
FEMA treats the two the same way. Each is an equity instrument when it is fully, compulsorily and mandatorily convertible and fully paid, and each becomes a debt instrument outside the NDI Rules when it is not. The same pricing rule applies to both. The Companies Act 2013 is where they part: a CCPS is share capital, a CCD is a debenture.
| Dimension | CCPS | CCD |
|---|---|---|
| What it is | Preference share capital: a preferential right to dividend and to repayment of capital on a winding up (section 43) | A debenture: an instrument of the company evidencing a debt (section 2(30)) |
| FEMA status | Equity instrument if fully and mandatorily convertible and fully paid (para 4.7); otherwise debt outside the NDI Rules (para 4.7.2) | Equity instrument if fully and mandatorily convertible and fully paid (para 4.6); otherwise debt outside the NDI Rules (para 4.6.2) |
| Pricing | Price or conversion formula fixed upfront at issue; conversion price not lower than the fair value worked out at issue (paras 4.7.1 and 8.1.2) | The same rule (paras 4.6.1 and 8.1.2) |
| Vote before conversion | Only on resolutions that directly affect the preference rights, a winding up, or a repayment or reduction of capital; on every resolution once the class dividend is unpaid for two years or more (section 47(2)) | None: no company may issue debentures carrying voting rights (section 71(2)) |
| Return before conversion | A preferential dividend, payable only out of profits (sections 43 and 123(1)) | Whatever the debenture terms provide, as a debt instrument |
| Register | Register of members, by class (section 88(1)(a)) | Register of debenture-holders (section 88(1)(b)) |
| Convertible option | Conversion as the terms of issue provide; for a foreign holder it must be compulsory and full (para 4.7) | Option to convert into shares approved by special resolution in general meeting before issue (sections 71(1) and 62(3)) |
Sources: RBI Master Direction on Foreign Investment in India (4 January 2018, updated up to 15 June 2026), paras 2.5, 4.1, 4.6 to 4.7.2, 8.1.1 and 8.1.2; Companies Act 2013, consolidated text on India Code, sections 2(30), 43, 47(2), 62(3), 71(1) and (2), 88(1) and 123(1). Both read 6 October 2026.
Pick on the rights the investor needs, because the FEMA result is the same. A CCPS puts the investor on the register of members from day one, with preference rights and a limited vote. A CCD keeps the investor on the register of debenture-holders, with no vote until conversion. Can a CCD be converted into CCPS? Section 71(1) allows conversion into shares, and share capital includes preference share capital, so the Companies Act permits it in principle. For a foreign holder the CCPS must itself be compulsorily convertible, and the Master Direction does not address that chain in terms, so confirm it with your AD bank before the term sheet.
A convertible note is a third Indian option, open only to a start-up company and treated as debt under FEMA until it converts (Master Direction para 2.5). That comparison, with the iSAFE, is on convertible notes for foreign investors in Indian startups. For the one-page version of this page, use the fundraising instrument cheat sheet.
When a priced round fits
A priced round fits when the cheque is large enough that investors want defined ownership, or when you can agree a fair valuation and want a settled cap table rather than a stack of convertibles that all convert at once later. It costs more in diligence, a shareholders' agreement and legal time, but it removes the uncertainty of what everyone actually owns. If several SAFEs or CCDs are stacking up, a priced round is often the cleanup.
Why the border decides the instrument
Almost every instrument mistake we see is really a structure mistake: a founder picks the instrument before deciding where the company that receives the money sits. If the receiving entity is a US C-corp, a SAFE is on the table. If it is an Indian company, foreign money comes in as a CCD or CCPS, on the pricing rules, with the filings. If you have not settled the holding structure yet, start with Delaware vs UAE vs India, then choose how to raise.
What we check before a round
- Receiving entity: which company takes the money, and what instruments it can legally issue.
- FEMA position: pricing, the FC-GPR and FLA filings, and any sectoral limits.
- Conversion terms: cap, discount or formula, and how a later priced round cleans them up.
- Instrument form: CCPS or CCD, on the vote, the return and the register the investor needs before conversion.
- Cap table: what everyone owns after conversion, modelled before you sign, not after.
Frequently asked questions
Can you use a SAFE to invest in an Indian company?
Not for foreign direct investment. FEMA does not recognise a SAFE as a compliant instrument for foreign money coming into an Indian company, because it is not compulsorily convertible on the terms Indian rules require. Foreign investors into an Indian company typically use a compulsorily convertible instrument, a CCD or CCPS, instead.
What is a CCD, and why do Indian startups use it?
A compulsorily convertible debenture is an instrument that must convert into equity, which is why FEMA treats it as equity and allows it as foreign investment under the automatic route for most sectors. Startups use it to take early money into an Indian company with a conversion price or formula set upfront, within the pricing rules.
Is a CCPS the same as a CCD?
Both are compulsorily convertible, so both are FEMA-friendly for foreign investment, but they differ in form. A CCD is a debenture; a CCPS is a compulsorily convertible preference share. Investors often prefer CCPS for the preference rights it carries. Which one fits depends on the commercial terms and the rights the round needs.
SAFE or priced round: which is faster?
A SAFE is faster and cheaper, because it defers the valuation to the next round and needs little negotiation. A priced round sets the valuation now, which means diligence, a shareholders' agreement and more legal work. Speed is the SAFE's advantage; a clean, settled cap table is the priced round's.
Should you raise on a SAFE or a priced round?
Raise on a SAFE when you want speed and are comfortable deferring valuation, typically a small US pre-seed or bridge. Raise a priced round when the cheque is large, investors want defined ownership, or you can agree a fair valuation. For foreign money into an Indian company, the real choice is usually a CCD or CCPS, not a SAFE.
CCPS vs CCD vs SAFE: which should an Indian startup use for a priced or unpriced round?
Not a SAFE, if the money is foreign and the company is Indian: a SAFE is not a recognised FDI instrument. For a priced round, issue equity shares or CCPS at a price not below a valuation certified by a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant (RBI Master Direction on Foreign Investment in India, para 8.1.1, updated up to 15 June 2026). For an unpriced round, a CCD or CCPS works, but the price or conversion formula is still fixed at issue, and the conversion price cannot be lower than the fair value worked out at issue (para 8.1.2). A start-up company can also look at a convertible note, which FEMA treats as debt until it converts (para 2.5).
Can a CCD be converted into CCPS?
Under the Companies Act 2013, yes in principle. Section 71(1) lets a company issue debentures with an option to convert them into shares, and share capital under section 43 includes preference share capital. The option must be approved by special resolution in general meeting before the debentures are issued (sections 71(1) and 62(3)). For a foreign holder, the CCPS must itself be fully, compulsorily and mandatorily convertible, or it is a debt instrument outside the NDI Rules (Master Direction para 4.7.2), and the price or conversion formula is fixed when the CCD is issued (para 4.6.1). The Master Direction does not address a debenture-to-preference conversion in terms, so confirm the reporting with your AD bank before you sign.
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This article is general information for founders, not legal, tax or financial advice for your specific raise. FEMA pricing rules, filing windows and instrument treatment change; confirm every point against current law before relying on it. The right instrument depends on your entity, your investors and the jurisdictions you touch. Have the round structured before you sign a term sheet.