Modeled after YC’s SAFE, AIR is the first legal convertible note in France

Modeled after YC’s SAFE, AIR is the first legal convertible note in France


The convertible note is a staple of any healthy startup ecosystem. It allows business angels to invest in seed startup companies without getting bogged down on the particularities of the valuation, by applying the equity exchange to the investment on the next round, with a declared discount (15-25%) applied to previous investors on a investor-by-investor basis.

Until recently, this common-practice investment method seemed impossible in France, due to a “monopolization” of the finance sector by France’s banks – a lieu of regulations, the principle of which allows only banks to accrue debt (note: this is the same regulation that forbids credit cards in France). French law treats the traditional American methodology of  convertible note as debt, thus a big gaping hole in France’s seed startup ecosystem – a slew of business angels investing 20-100K€, at least a dozen funds with a dedicated seed fund, and yet no convertible note?

Earlier this year we reported that three French Business Angel investors had invested 25,000€ in 101 Projects (#101projets) using a modified form of the traditional convertible note. At the same time, US Accelerator Y-Combinator announced SAFE – a financial instrument that acts a lot like a convertible note (give money today in exchange for variable equity later, based on future valuation) – which inspired Paris accelerator TheFamily to sit down with lawyers and see if SAFE could work in France.

The accelerator announced this week AIR (“rapid investment agreement”), a downloadable template (.zip file available here) for a financial instrument allowing angels to invest in French startups in exchange for an equity value determined during the next round of funding.

If adopted, the new template for investment will make it easier for foreign investors to invest in a French company with confidence that the instrument being used will afford them the same negotiating points to which they are accustomed.

From a startup side, no system is perfect, and the AIR or SAFE are not any different: the key is in educating yourself around what the finer points of the document are, as well as understanding what standard practices & pitfalls there are to look out for.