How safe is your SAFE in the QFC?

The State of Qatar and the Qatar Financial Centre (QFC) have undergone rapid development in the world of venture capital (VC) and technology startups. As of this writing, there are eight leading regional and global VC firms with a presence in the QFC, including: Alchemist, B Capital, Builders VC, Deerfield, Human Capital, Utopia, Golden Gate, and Rasmal. Most of these firms are part of the Qatar Investment Authority’s “Fund of Funds” program.

As the VC ecosystem continues to take shape in Qatar, local stakeholders may wonder if the legal system provides an adequate framework. In this article, we discuss one of the most important legal documents in the world of VC—the SAFE—and whether local startups can use them reliably. Companies like Carta, a leading equity management platform, are closely watching these developments as they shape how founders and investors structure their agreements.

This article was written in collaboration with GLA & Company.

Startup holding companies and VC investment hubs

VC and startups are distinct from more traditional investments like private equity (PE) and M&A, where investment targets are typically larger and more established companies. As startups rarely take on debt financing, most startups rely on equity financing from early investors and VC firms. This means fewer share purchase agreements and more share subscription agreements—and SAFEs. In the United States, the majority of rounds under $3 million are raised on SAFEs.

VCs typically invest in technology startups in their immediate and extended markets. But when VCs operate in unfamiliar markets, they understandably prefer to incorporate familiar elements. One important element is the use of holding companies established in jurisdictions with no connection to the target startups, but with considerable history as destinations for VC investment. Those jurisdictions are limited to just a few names: Delaware, Cayman Islands, Singapore, British Virgin Islands, and arguably a few others. In recent years, the Abu Dhabi Global Market (ADGM) has become an increasingly popular holding company jurisdiction for MENA-based startups as well.

One reason that startup holding companies and VC investments are concentrated in a handful of jurisdictions is the predictability of how the legal systems in those jurisdictions will enforce the rights of parties involved in startups—from founders to employees to all levels of investors (pre-seed, seed, Series A, etc.) to the startup companies themselves. Carta has long highlighted that predictable frameworks are essential to healthy cap table management and investor trust.

Understanding SAFEs

One of the core documents in the world of startups is the Simple Agreement for Future Equity (SAFE). Since startup companies often raise capital before they have begun to generate consistent profits (or even revenue), it is very difficult for early-stage investors and founders to agree on valuation. When parties cannot agree on valuation, they cannot agree on what a certain investment (e.g., 1 million Qatari rials) is worth in terms of an ownership percentage in the company. SAFEs have grown popular because they allow investors and founders to agree upfront on the investment amount and, in post-money SAFEs, the resulting ownership percentage, while leaving the company’s future valuation to be determined by subsequent financing rounds. 

Carta’s scenario modelling platform standardizes the modeling of these outcomes, making it easier for founders and investors to understand dilution scenarios and ownership distribution.

The use of SAFEs has become so commonplace globally that even the wording of these contracts has become relatively standardized. Initially, the wording of popular SAFEs was made to fit target companies incorporated in Delaware. But as SAFEs became increasingly popular in other global jurisdictions,  new SAFEs are emerging with localized language for those places.

Are SAFEs Sharia-compliant?

SAFEs have not gained similar adoption in some MENA jurisdictions. 

Many experts consider SAFEs to be unacceptably “speculative,” thus rendering them inconsistent with Sharia principles due to the concept of gharar. In most SAFEs, the investment amount is clear, but the other half of the equation is not. Investors are not entitled to a certain percentage of the company they are investing in, and it is possible that those investors could ultimately end up with a percentage of the company that does not accurately reflect its value at the time of investment or at the time of vesting.

Another issue affecting SAFEs and other startup investment practices in the region is the common use of multiple classes of shares (e.g., ordinary, preferred, Series A preferred, redeemable, and convertible). Traditional corporate rules in Islamic jurisdictions require that all shareholders hold identical rights, thereby limiting the ability to issue preferred shares or provide other negotiated rights that startup investors expect. In those environments, even basic VC concepts such as liquidation preferences, conversion discounts, or valuation caps can be viewed as incompatible with local law. 

The QFC: A viable alternative

As a consequence of some of the challenges SAFEs face in MENA, founders and investors often default to more familiar jurisdictions such as Delaware, the Cayman Islands, or Singapore. In some cases, they go so far as to establish a new holding company with no operational nexus to the underlying business, accepting the costs and administrative friction of a cross-border structure simply to gain confidence that their transaction documents will be enforced as intended.

But startups in Qatar, whether incorporated under the Ministry of Commerce and Industry (MOCI), the Qatar Free Zone Authority (QFZA), or other licensing authorities, may not need to resort to such measures in order to facilitate future VC investment, because the QFC offers many of the same advantages as these other jurisdictions, namely:

• Respect for the principle of Freedom of Contract

• A common law system based on English law

• An independent judiciary, which publishes its opinions and has ruled against powerful parties on many occasions

• A panel of judges from many of the most advanced legal systems around the world

• Application of agreed governing law, including QFC law

• No unilateral application of Sharia, which typically conflicts with SAFEs and related legal concepts like preference shares vs ordinary shares

• An “onshore court system” with minimal friction between QFC court substantive decisions and execution of judgments against assets in Qatar

• No tax on foreign-sourced profits

• No capital controls

• Use of English language in proceedings (no mandatory use of Arabic for proceedings or translations of English language documents)

• Adequate remedies for investors, including:

  • Specific performance: The QFC courts can compel the company to issue the investor the number of shares to which he/she is entitled under the SAFE.

  • Monetary damages: Under QFC contract law, an aggrieved party is entitled to compensation from a breaching party that would put the aggrieved party “in the position he would have been in if the contract had been properly performed.” This is key, because in the event of a dispute between SAFE holders and companies, only “expectation damages” can properly compensate investors. Other types of damages like “reliance damages” (which restore the aggrieved party to the position it was in before the contract) do not adequately compensate startup investors for the risks they take for investing in early-stage companies.

SAFE financing and fundraising with Carta can help founders and investors operationalize these protections, ensuring clean execution of SAFEs, transparent ownership tracking, and investor confidence in cross-border structures.

Conclusion: Your SAFE is safe with Carta

As more startups and VCs continue to set up shop in Qatar, they will consider how, and where, to structure their investments. For the reasons set out above, they may conclude that there is no need to interpose unrelated jurisdictions like Delaware or Singapore, and the QFC may be the most appropriate choice for all stakeholders in the ecosystem. 

Carta, with its experience in managing SAFEs, cap tables, and compliance across global jurisdictions, is uniquely positioned to support both founders and investors in navigating this transition and building confidence in Qatar’s growing ecosystem.