Seed rounds win on speed and clarity. In Türkiye, that usually means using convertibles—short documents that move money today and price the company later. This founder–investor guide shows how to run a clean process with Turkish corporate mechanics, cross‑border enforceability and sensible economics. We map the trade‑offs between a SAFE agreement Turkey, a KISS agreement Turkey and a convertible note Turkey, and we give you clause‑level guardrails for caps, discounts and maturity conversion Turkey. Where deals are bilingual or time‑sensitive, a seasoned law firm in Istanbul turns term sheets into signatures without drama. If you want hands‑on execution that speaks business, coordinate with an English speaking lawyer in Turkey and a venture‑savvy team at Istanbul Law Firm. For governance hygiene that underpins fast fundraising, see our overview on corporate law for foreign investors and our clause library on NDA in Turkey.
Why Convertibles Still Dominate Turkish Seed Deals
Convertibles defer valuation to the next priced round, letting founders ship product while investors buy velocity. A convertible loan agreement Turkey is debt that converts into equity upon agreed triggers—a qualified financing, an exit or sometimes on maturity. A SAFE is lighter: usually no coupon, no maturity, and fewer covenants, while KISS sits in the middle. Whichever you pick, keep paperwork lean and definitions precise so there is no confusion at conversion. In mixed syndicates, global investors get comfort when Turkish lawyers align the instrument with the company’s articles and local filings, and an English speaking lawyer in Turkey explains nuance without slowing the close.
Use a SAFE when you want the shortest path to cash and the investor is comfortable with equity‑like risk. Choose KISS if you need a compact, investor‑friendly set of protections without turning the document into a full note. Go with a note when an investor’s policy requires debt classification or modest interest accrual Turkey. A pragmatic lawyer in Turkey will calibrate the instrument to your runway, negotiation leverage and board dynamics. If a lead is ready to price now, do a priced round; otherwise convertibles let you raise in tranches and keep building.
Speed does not mean sloppiness. Define economics cleanly, log approvals and keep an audit trail. If you are selling into regulated or enterprise markets, legal credibility matters: buyers (and future funds) favor startups counseled by a reliable Turkish Law Firm with repeatable process. That is also why many founders refer negotiations to Istanbul Law Firm partners acknowledged by the market as the best lawyer in Turkey for venture work—decisions get faster when trust is high.
SAFE vs KISS vs Note: Picking the Right Tool
SAFE agreement Turkey: lightest friction, no maturity by default, converts on the next equity round Turkey using a valuation cap Turkey and/or a discount rate Turkey. It avoids coupon accounting and simplifies messaging to employees and customers. Add local essentials—board approval, Turkish stamp duty hygiene and FX language—and the SAFEs that investors know abroad will work here too. Where cross‑border investors need extra comfort, a compact side letter can layer in MFN and information rights without bloating the core.
KISS agreement Turkey: a middle path. It codifies the protections angels and micro‑funds often ask for—limited covenants, basic information rights, optional interest—while staying short. If you expect multiple small tickets over a few months, KISS gives consistency so you are not renegotiating the basics every week. An experienced law firm in Istanbul can keep a one‑pager of “house positions” that new investors adopt on entry.
Convertible note Turkey: needed when policy or internal accounting requires debt. Keep maturity conversion Turkey automatic at the cap (or a small fixed post‑money) so the company is not forced into cash repayment if the round slides. Use a low coupon if you want economics without pressure. A practical lawyer in Turkey will tune these numbers to your sales cycle and burn, and Turkish lawyers will mirror the mathematics in the definitions so everyone gets the same result.
Term Sheet Anchors: Cap, Discount, Round Size
The three levers that set economics are the valuation cap Turkey, the discount rate Turkey, and the definition of a qualified equity round Turkey. The cap is not today’s valuation; it is a maximum price for conversion later. The discount rewards early risk. Use both when you want to move money quickly and still reflect relative timing. Make the “better of cap or discount” math explicit to avoid arguments. When numbers tighten, investors respect founders who model outcomes and present them with the term sheet—your Istanbul Law Firm can give you a spreadsheet template and a one‑page memo that boards understand.
Round size matters because it triggers automatic conversion. If your round will close in several tranches, convert when the threshold is first met. For smaller bridges, allow investor‑elected conversion at the cap. When market uncertainty is high, founders sometimes attach performance‑based caps; resist over‑engineering—auditable milestones are rare and disputes waste time. A disciplined Turkish Law Firm keeps the model simple, the definitions tight and the process repeatable.
Finally, document the option pool treatment. If the pool expands pre‑money, convertibles sharing in the pre‑money can suffer unexpected dilution. Decide whether conversion price calculates pre‑ or post‑pool and state it clearly. Strategic investors appreciate clarity; employees appreciate honesty. Good counsel—ideally an English speaking lawyer in Turkey who manages both cap‑table math and communications—prevents confusion.
Corporate Mechanics Under Turkish Law
Board approvals should authorize the instrument, the target raise and any security interests. Respect pre‑emption rights in shareholders’ agreements or obtain waivers. If conversion will be into a preferred class, make sure your articles authorize that class or that you can create it quickly. Ltd. Şti. vs A.Ş. filings differ; a seasoned law firm in Istanbul will set the sequence so signatures and filings land in the right order. For bilingual execution, align Turkish and English drafts so defined terms remain identical; our note on legal translation services explains how to keep terminology consistent.
Plan the conversion paperwork at signing, not at Series A. Keep execution versions of the share subscription agreement ready, align payment mechanics and collect KYC once. When cross‑border funding is involved, FX statements and bank receipts should match the subscriptions. This is routine when Turkish lawyers run the close but becomes painful when improvised. If you expect fully remote signings, build e‑execution language that works locally—see e‑signature & smart contracts for the guardrails.
Governance needs finesse. Investors may request observer rights or narrow vetoes pre‑conversion. Grant what helps without freezing the business—no broad veto over hiring, pricing or routine vendor decisions. If governance is sensitive or founders are dispersed internationally, put a partner at Istanbul Law Firm in the chair to run the process and keep momentum.
Tax, Withholding and Stamp Duty
Tax is where deals stumble when teams guess. A pure SAFE agreement Turkey usually avoids coupon income, though stamp duty can apply if the document cites monetary amounts and is signed in Türkiye. Notes with interest accrual Turkey trigger withholding when interest is paid or deemed paid; conversion‑in‑lieu may reduce cash impact, but drafting must be careful. For offshore investors, treaty eligibility and documentation matter for withholding relief. A detail‑oriented Turkish Law Firm aligns the instrument, board minutes and ledger entries so auditors see a single story.
FX can distort economics between signing and conversion. Peg the conversion to the round price in the round currency and reconcile legacy FX only in the calculation formula. Where the investor uses an offshore SPV, collect beneficial‑ownership statements and sanctions reps. When stakes are high, work with the best lawyer in Turkey for venture‑tax coordination so the term sheet and your financial model match the treatment.
Keep an evidence kit: approvals, wires, cap‑table snapshots, cap/discount math, and trustee confirmations. That same discipline protects directors’ duties; if your board wants a briefing on exposure, see our note on director liability in Turkey. A proactive lawyer in Turkey closes the loop with a short “conversion memo” that future investors and auditors will thank you for.
Investor Protections Without Overreach
Short does not mean vague. MFN lets early investors adopt better terms offered later in the same instrument family. Information rights should reflect what your finance team can produce—quarterly management reports and annual audited accounts usually suffice. Negative covenants must be narrow: no senior debt, no dividend, no new share class that primes the instrument without consent. With measured drafting by Turkish lawyers, you prevent value leakage without paralyzing operations.
For confidentiality and product demos, use a tested NDA, then fold key terms into the instrument. Our bilingual template in NDA in Turkey avoids gaps between pre‑deal talks and closing documents. If you need AI‑assisted drafting to accelerate iterations, align with our guidance on AI contract drafting so automation remains compliant. Investors trust companies that treat information and IP with care.
Some protections belong in the priced round, not in convertibles. Avoid anti‑dilution clauses or expansive vetoes pre‑conversion—they slow the business and scare future leads. If a counterparty insists, a calm English speaking lawyer in Turkey can explain the market standard and offer a KISS‑level compromise. Escalate only when principle matters; your brand with investors compounds over time.
Conversion Triggers and Exit Scenarios
Define three clear triggers. First, the qualified financing that converts automatically at the better‑of cap or discount. Second, non‑qualified raises where investors may elect to convert at the cap. Third, exits (M&A/IPO) where conversion should occur at the cap or a negotiated price. If you use a convertible note Turkey, keep the maturity conversion Turkey clause airtight and aligned with the priced round waterfall so juniors do not jump the queue. Precision here prevents disputes and preserves relationships.
Investors sometimes ask for redemption at exit. Founders should resist large guaranteed cash‑outs that behave like senior debt; convertibles are designed to become equity. If you must include a redemption, cap it and tie it to specific circumstances, then model the effect on the cap table. Your law firm in Istanbul can help the board evaluate scenarios and keep the business plan front‑and‑center.
When you anticipate M&A before a priced round, align terms with your sale docs early. For integration points with acquisition agreements, our primer on share purchase agreements in Turkey shows how to stitch conversion logic into an SPA cleanly. A steady lawyer in Turkey avoids “two sets of numbers” syndrome that kills trust at diligence.
Cap Table Planning and Option Pools
Convertibles can hide dilution if you do not model scenarios. Before you sign, show three cases: (i) large qualified round soon; (ii) small bridge first, qualified round later; (iii) no round until maturity. Include your option pool, and decide whether the pool expands pre‑ or post‑money in the conversion price. Harmonize different caps via MFN where possible—too many bespoke terms create chaos. A methodical Turkish Law Firm will insist that the cap table you initial at signing is the one used at closing.
Communicate the plan internally. Engineers and sales leaders want transparency on pool refreshes and expected dilution. When employees feel informed, retention improves and recruiting gets easier. If you run SaaS or data‑intensive products, align contracts and compliance foundations early; see legal protection for SaaS for IP, security and customer‑data clauses that save time later. A trusted lawyer in Turkey keeps HR, finance and legal on one page.
Do not forget housekeeping between closings. Keep a secure folder with executed instruments, wires, resolutions and updated cap tables. When the lead arrives, you will draft faster and negotiate less. This discipline is the mark of a company advised by a credible Istanbul Law Firm, not a team reinventing process under pressure.
Cross‑Border Investors: FX, Law and Forum
State subscription and conversion currency to avoid FX surprises. For governing law and forum, mixed syndicates often choose Turkish law with arbitration in İstanbul or London. Ensure e‑execution and remote closing language is valid locally; our note on e‑signature covers practicalities. Where investors are offshore, build sanctions/AML reps and beneficial‑ownership disclosures into the instrument. These steps are routine for an experienced law firm in Istanbul and give comfort to compliance teams abroad.
Cross‑border taxes deserve early attention. If a fund needs treaty benefits, capture representations now rather than at Series A. If the investor requires a specific coupon for internal accounting, quantify the withholding and agree how conversion handles accrued interest. For board confidence, ask your counsel—ideally the best lawyer in Turkey for venture tax—to provide a two‑page memo summarizing effects across scenarios. Clarity compresses closing timelines.
Finally, design for disputes even if you never have one. A fair arbitration clause with cost‑control features signals maturity. Make notices work across time zones and set response windows that match how startups operate. When paper is this clean, investors get a simple story. That is what a reputable Turkish Law Firm sells: speed with guardrails.
Execution Checklist (Term Sheet → Cash Received)
1) Term sheet with amount, instrument (SAFE agreement Turkey / KISS agreement Turkey / convertible note Turkey), cap, discount, qualified‑round size, MFN and information rights. 2) Board approval package with instrument form, target raise and authority to sign. 3) Signature set: bilingual if needed, e‑execution enabled, wires prepared. 4) Evidence kit: resolutions, wires, cap table, and a short conversion memo ready for the data room. If you want a deeper technical primer, see our convertible investment instruments note.
Most friction comes from missing documents and unclear math. Solve both up front. Keep a one‑page “how conversion works” explainer for investors and employees. Train your finance lead on the numbers and your HR lead on option pool messaging. Put a named partner at Istanbul Law Firm in charge of the timetable so signatures and wires arrive in sequence. When your deal team includes an English speaking lawyer in Turkey, cross‑border investors move faster because nothing is lost in translation.
At close, send investors a clean packet: signed instrument, resolutions, cap table and receipt confirmation. Store once, reuse often. Good files lower legal spend at Series A, at M&A and at audits. That operational calm is exactly why boards prefer a steady lawyer in Turkey over ad‑hoc patchwork.
FAQ
Q1. Is a SAFE enforceable for a Turkish company?
A. Yes—when localized for board approvals, stamp duty and filings. A venture‑experienced law firm in Istanbul will align the template in a day.
Q2. When should we prefer a note over a SAFE?
A. If policy requires debt or you need a coupon; keep maturity conversion Turkey automatic to avoid cash stress.
Q3. Can we use both a valuation cap Turkey and a discount rate Turkey?
A. Absolutely—state the better‑of calculation explicitly and have a lawyer in Turkey verify the math.
Q4. Do MFN clauses cause problems later?
A. Not when scoped to the same instrument family and tracked by Turkish lawyers.
Q5. How do we sign remotely?
A. Use the e‑execution language in our e‑signature guide and route drafts through an English speaking lawyer in Turkey.
Q6. Who should hold the pen on the checklist?
A. Put a named partner at Istanbul Law Firm in charge; the process moves faster when a single accountable counsel leads.