Written by: Fathya Rizky Rania, Fitria Najla Djohar, Gustiny Yolanda Situmeang, Nur Alina, and Tonggorito Simbolon
Indonesia’s startup funding scene is slowing down. According to DealStreetAsia and Kickstart Ventures, startup funding in the first half of 2025 only reached USD 78.5 million the lowest on record, and the first time Indonesia has fallen behind the Philippines. This is a far cry from 2021, when startup funding nearly reached USD 7 billion. One factor that rarely gets attention is the barrier within investment instruments themselves, particularly the Simple Agreement for Future Equity (SAFE).
SAFE is an agreement where an investor gives money to a startup now and receives shares in the future when a trigger event occurs. No interest, no maturity date. First developed by Y Combinator in 2013, it has become the standard early-stage investment instrument in the United States and has been widely adopted in Singapore and Vietnam. So where does SAFE stand under Indonesian law?
What Is SAFE?
SAFE is neither a loan nor regular shares. The investor hands over funds and the startup promises to convert those funds into shares when one of three trigger events occurs: an Equity Financing (a new funding round at a fixed valuation), a Liquidity Event (change of control, direct listing, or IPO), or a Dissolution Event (company winding up). In exchange for investing early, SAFE investors typically receive a discount rate (the right to buy shares cheaper than later investors) and a valuation cap (a ceiling on the valuation used at conversion).
SAFE Under Indonesian Law
SAFE is not illegal in Indonesia. It can be validly created under the principle of freedom of contract in Article 1338 of the Civil Code, as long as it meets the validity requirements of Article 1320 is mutual consent, legal capacity, a specific object, and a lawful cause. Before a trigger event occurs, the investor’s right can be understood as a receivable right (hak tagih) under Article 35(2)(a) under Indonesian Company Law (UU PT), given that the company has received money from the investor.
The problem, however, lies in conversion. Article 35(1) of the Company Law requires that converting a receivable right into shares be approved by a General Meeting of Shareholders (GMS). Under Government Regulation No. 15 of 1999, the full process involves a conversion agreement, a GMS (General Meeting of Shareholders), a notarial deed, Ministry of Law and Human Rights approval, and an announcement in two national newspapers.
This is fundamentally at odds with how SAFE works, it is designed to convert automatically the moment a trigger event occurs, with no additional approval needed. The procedural burden defeats the very purpose of using SAFE in the first place.
The Impact on Startup Fundraising in Indonesia
This mismatch in conversion procedures has a direct impact on how Indonesian startups raise funds. Karman, an incorporation platform serving Indonesian founders in Singapore, notes that nearly all of Indonesia’s tech unicorns including Gojek, Tokopedia, Traveloka, and Bukalapak set up holding companies in Singapore before their major funding rounds, precisely because Singapore’s legal framework clearly accommodates SAFE. For early-stage startups with limited capital, having to incorporate abroad just to access a standard investment instrument is no small hurdle.
Singapore’s approach offers a useful contrast. Since 2018, the Singapore Academy of Law (SAL) and the Singapore Venture & Private Capital Association (SVCA) have offered the Venture Capital Investment Model Agreements (VIMA) free, standardized documents for early-stage VC transactions, including the CARE (Convertible Agreement Regarding Equity), a SAFE equivalent under Singapore law. Indonesia has no equivalent initiative.
Then, what can we do?
For regulators, OJK should consider issuing a specific regulation allowing SAFE conversion through a board circular resolution without a full GMS as long as the SAFE’s conditions have been met. This does not require amending the Company Law a dedicated OJK regulation would suffice. Developing an industry-standard document set equivalent to VIMA, in collaboration with Amvesindo and the legal community, would also be a meaningful step forward.
For startups and founders, do not use Y Combinator’s SAFE template without adapting it to Indonesian law. Include clauses that anticipate the Article 35 conversion procedure covering GMS cooperation, notarization, and Ministry approval and agree on costs and timelines upfront.
For investors, legal due diligence is as important as business due diligence. The automatic conversion that SAFE investors expect elsewhere does not apply directly under Indonesian law.
SAFE is not illegal in Indonesia. Under the principle of freedom of contract in Article 1338 of the Civil Code, a SAFE agreement can be validly executed, and the investor’s rights prior to conversion can be understood as a receivable right under Article 35(2)(a) of the Company Law, given that the company has received money from the investor. The issue is not whether SAFE is valid it is. The issue is what happens when conversion is due. Article 35 of the Company Law requires conversion to go through a GMS (General Meeting of Shareholders), a notarial deed, and Ministry approval, a process that is fundamentally at odds with SAFE’s automatic conversion mechanism.
For that reason, clear steps are needed from regulators, especially the OJK, to issue specific rules that accommodate more efficient early-stage investment instrument conversions. While those regulations are not yet in place, startups and investors need to make sure that every SAFE agreement made in Indonesia already follows the formal steps in Article 35 of Indonesian Company Law right from the beginning.
