What is the CARE?
CARE (Convertible Agreement Regarding Equity) is a flexible and founder-friendly investment agreement designed to support startup fundraising in Asia. CARE enables early-stage startups to raise capital without setting a company valuation upfront, making it ideal for seed or pre-seed investment rounds.
Launched in 2018 by the Singapore Academy of Law, CARE was developed in collaboration with lawyers, investors, and startup professionals. It is modelled after popular U.S. convertible instruments such as SAFE (Simple Agreement for Future Equity) but optimised specifically for Asian startup ecosystems.
CARE vs SAFE, and Convertible Notes: What's the Difference?
Understanding how CARE compares to startup investment instruments, like SAFE (Simple Agreement for Future Equity) and Convertible Notes, can help founders and investors choose the best tool for their fundraising needs.
CARE | SAFE | Convertible Note | |
Type | Convertible Equity | Convertible Equity | Convertible Debt |
Region Focus | Asia (esp. Singapore) | U.S/Global | U.S/Global |
Interest/ Maturity | ❌ No | ❌ No | ✅ Yes |
Maturity | ❌ Optional | ❌ No | ✅ Yes |
Repayment Risk | ❌ No | ❌ No | ✅ Yes |
Founder Friendly | ✅ High | ✅ High | ❌ Low |
Complexity | ✅ Simple | ✅ Simple | ❌ Complex |
Usage | Rarely used | Most commonly used | Deals needing debt features |
Why Use a CARE for Startup Investment?
A CARE is used when an investor provides upfront capital in exchange for future equity, depending on which event occurs first. These trigger events include:
- Equity Financing
- Liquidity Event
- Dissolution Event
- Maturity Conversion (optional)
The CARE delays company valuation, which can be challenging and subjective at early stages. Instead, it defines valuation based on future events, making it one of the early-stage startups’ most practical convertible agreements.
Benefits of Using a CARE Agreement
- Standardisation: CARE follows industry-standard terms, saving time and legal costs.
- Efficiency: The agreement can be auto-generated, simplifying the investment process.
- No Immediate Valuation Required: Perfect for pre-revenue startups or those without a stable valuation.
Key CARE Deal Terms Explained
Understanding a few core terms is crucial for both startup founders and angel investors:
1. Discount Rate
Allows investors to convert their investment into equity at a discounted share price during a qualified financing round.
Formula: 100% – agreed discount percentage
Example: A 30% discount means the investor gets shares at 70% of the price.
Typical discount rates range from 10% to 30%.
2. Minimum Equity Raise
Specifies the minimum amount the startup must raise for the CARE to convert automatically to equity.
3. Multiple for Liquidity Event
In an IPO or acquisition, investors may receive multiples of their original investments in cash or equity.
4. Maturity Conversion Terms
If no trigger event occurs, the CARE may convert into equity at a future date using a valuation cap, ensuring investors are compensated for risk.
Important Provisions for Investors and Founders
While CARE is designed to reduce complexity, some clauses require extra attention:
- Liquidation Priority: Defines where CARE investors stand if the startup dissolves.
- Most Favoured Nation (MFN) Clause: Gives early investors the right to better terms if new ones emerge.
- Information Rights: May provide investors access to key financial data and performance reports.
- Representations and Warranties: Legal disclosures and protections that ensure transparency.
When Is the CARE a Good Fit?
CARE is best suited for:
- Seed and pre-seed investments
- Startups needing quick capital
- Founders seeking non-dilutive and valuation-flexible fundraising tools
Whether used as-is or as a customisable template, CARE simplifies and accelerates the investment process in Asia’s startup ecosystem.
Are you a Founder raising capital? Learn how a Founder SPV can help streamline your startup’s fundraising and keep your CapTable clean. Book a call with Auptimate now to get started.
