How to structure startup investment in Spain: equity, loans, SAFE and other instruments

The three most common ways to structure an investment in a Spanish startup are these.

You can sell equity through an SL capital increase signed before a notary. You can take a loan, including a participating loan (préstamo participativo).

Or you can sign a convertible agreement — a convertible loan or a SAFE — that turns into equity later.

The right choice depends on three things: whether the company is already registered, whether the valuation is agreed, and how much control the founders are willing to share.

A financial instrument is more than a way to raise money.

It sets the relationship between founder and investor for years: who decides, who gets paid and when, and what happens in the next round and on an exit.

In practice you will meet other instruments too, as well as documents that fix the deal terms.

They are not a single classification: some are ways of providing money, others are contracts setting out the parties’ rights. All of them are covered below.

For each one: what it is, the pros and cons for the founder, and how it works in a Spanish SL.

At the end: what to do if the company does not exist yet, and answers to common questions.

All instruments in one table

The two basic forms: loan and equity

These are the two most traditional ways to fund a startup. The choice depends on your stage and on what you prefer: sharing control or carrying debt.

Loan

The investor lends the company money for a fixed period at an agreed interest rate. At the end of the term the company repays the principal plus interest.

• Advantages: clear repayment terms and rate; a loan does not change the shareholdings.
• Disadvantages: regular payments put financial pressure on the startup; the investor gets no say in management or key decisions — some founders like that, but it also means losing “smart money”.

For a startup without revenue an ordinary loan is almost always risky: there is nothing to pay interest from, and money goes into servicing debt instead of growth. If you need debt, look at the participating loan first — see below.

Equity

The investor acquires a stake in the company. In exchange for the money they become a shareholder with a right to a share of profits and, usually, a vote.

• Advantages: the money is not repaid; if the company grows, everyone wins; investors often bring experience and contacts.
• Disadvantages: founders are diluted now and in every later round; the investor shares your risk and will want control in return.

How it works in Spain. An SL has no shares — its capital is divided into participations (participaciones sociales).

For an investor to come in with new money, the company increases its capital:

1. The general meeting (junta general) approves the capital increase by more than half of the votes of all participations (art. 199 LSC).
2. Existing members have a pre-emptive right to take up new participations in proportion to their holdings when contributions are in cash (art. 304 LSC). To make room for the investor they waive it, or the meeting excludes it — which needs at least two thirds of the votes and a directors’ report (arts. 199 and 308 LSC).
3. The increase is executed in a notarial deed (escritura) and registered at the Mercantile Registry; the resolution and its execution are registered together (art. 315 LSC).

Investors usually pay above nominal value — the difference is the share premium (prima de asunción).

That is how they come in at the agreed valuation while the nominal capital stays small.

If the investor buys existing participations from a founder, that is a transfer: it needs a notarial document (art. 106 LSC) and is subject to the restrictions in the articles of association (art. 107 LSC).

Shareholders’ agreement (pacto de socios)

This is a legal document, not a financial instrument — but it defines how the founder–investor relationship will work.

It sets out each side’s rights and obligations, profit distribution, terms for further investment and how the company is managed.

In the earlier version of this article we called it a partnership agreement.

• Advantages: the investor can influence strategy directly; the rules are written down in advance, which builds a solid base for a long relationship.
• Disadvantages: less operational freedom for the founder; possible disagreements over management.

What a pacto de socios usually covers:

• founder vesting;
• non-compete;
• investor veto rights on key decisions;
• tag-along and drag-along — the right to join a sale and the obligation to sell together with the majority;
• anti-dilution protection;
• liquidation preference — who gets paid first, and how much, when the company is sold.

A pacto de socios binds the parties who sign it.

To make specific rules binding on the company and on future members, they are moved into the articles of association, as far as the law allows.

It is worth checking the economics of these terms before the lawyer drafts them — that is part of our work on the founder–investor agreement.

Convertible instruments: convertible loan and SAFE

If it is too early to agree on a valuation, you can raise money now and fix the equity later, in the next round. That is what convertible loans and SAFEs are for.

Convertible loan (convertible note)

The investor lends money on the condition that, when agreed events happen (usually the next round), the debt converts into equity on pre-agreed terms.

The investor does not pay for equity at signing — they provide a loan that converts later.

• Advantages: no need to price the company now; flexible terms — a discount to the next round price, a valuation cap, interest, maturity.
• Disadvantages: negotiation and drafting take time; the conversion terms need legal analysis.

What matters in Spain. An SL may not issue bonds convertible into participations (art. 401 LSC).

So an SL’s convertible note is a private loan agreement, not a securities issue.

Conversion is a capital increase by set-off of the investor’s claim (aumento por compensación de créditos, art. 301 LSC):

• the claim must be fully liquid and due at the time of conversion — say so explicitly in the contract;
• when the meeting is called, the directors issue a report on the nature of the claim, the investors and the number of new participations;
• an auditor’s certificate is required only for an SA, not for an SL — a frequent mistake in third-party guides;
• a conversion is not a cash contribution, so the pre-emptive right of art. 304 LSC does not apply. But a resolution that heavily dilutes minority members without a company interest can be challenged as abuse of the majority (art. 204 LSC). That is why members’ consent is better obtained in advance, in the pacto de socios.

SAFE (simple agreement for future equity)

The investor pays now and receives equity in the future — at the next round’s valuation, with a discount or a cap.

It was designed for early stages, when the company’s value is hard to determine.

• Advantages: no valuation negotiation; shorter and cheaper than a priced round.
• Disadvantages: the valuation and conversion terms only emerge in a future round; founders will be diluted, and with several SAFEs in a row the final picture is not visible straight away.

What matters in Spain. The SAFE comes from US practice and Spanish law has no specific regime for it.

It is a valid atypical contract under freedom of contract (art. 1255 of the Civil Code).

Conversion still goes through a notarial capital increase with registration, most often by the same set-off under art. 301 LSC. So a SAFE for a Spanish SL needs adapting.

A US template used as-is invites disputes over whether the investor holds a claim against the company and when it becomes due.

Participating loan: debt that behaves like equity

The Spanish préstamo participativo is defined in art. 20 of Royal Decree-Law 7/1996.

It suits founders who do not want to give up equity but need something other than an ordinary bank loan:

• the interest is variable and depends on the company’s performance — net profit, turnover, total assets or any other measure the parties agree; a fixed component can be added;
• early repayment is only allowed if it is matched by an equal increase in the company’s own funds, and the contract may include a penalty for it;
• in insolvency it ranks after ordinary creditors;
• for capital reduction and liquidation purposes it counts as equity — helpful when losses have eaten into capital.

This is how the state agency ENISA funds startups. A participating loan can also be convertible, with conversion terms under the same art. 301 LSC.

More on the programmes in Support programs for startups and small businesses in Spain.

Revenue-based financing

The startup receives capital in exchange for a percentage of future revenue until the amount plus an agreed premium is repaid.

It suits companies with healthy revenue that want to avoid both traditional debt and equity dilution.

• Advantages: payments follow revenue — you pay less in a weak month; no dilution.
• Disadvantages: the annualised cost is often high; regular financial reporting to the investor.

Option, investment agreement and forward

These three contracts are often used when an investor’s entry needs to be spread over time or its terms fixed in advance.

Option agreement

One party (the option seller) gives the other (the buyer) the right to buy or sell a set number of shares at an agreed price within a period or on set dates.

The buyer gets a right, not an obligation. They pay an option premium for that right, whether or not they use it.

If they exercise, they pay the price set in the contract; if not, the seller keeps the premium and the buyer has no further obligation.

• Advantages: the investor gets the right to buy equity later at a price known today; founders can attract interest without selling equity straight away.
• Disadvantages: agreeing the price and other terms can be hard; drafting and negotiation take time and money.

The reverse is a put option agreement: the investor buys equity with the right to sell it back at a set price if the company misses agreed targets.

It protects the investor and motivates the founder to grow the company’s value — but it puts pressure on the company, which needs cash for the buy-back, and the future price is hard to set fairly.

In Spain an option agreement needs no licence and is usually a simple written contract.

If it is exercised, however, the transfer of SL participations must be made in a notarial document (art. 106 LSC), subject to the articles of association. Employee stock options are a separate topic with their own tax rules.

Investment agreement

An agreement between investor and startup that fixes:

• the amount invested;
• the investor’s stake;
• the payment schedule;
• each side’s rights and obligations;
• exit terms and other material conditions.

The investor gets a right to equity and other contractual rights. The startup gets money to develop, and often the investor’s expertise, network and support.

It is the same logic English-language practice calls a venture capital agreement.

• Advantages: the terms can be set out in detail — amount, capital structure, investor rights, funding stages.
• Disadvantages: needs legal work, time and money; investors may add terms that do not favour the founders.

No licence is needed and, as a rule, notarisation is optional. But the equity itself only exists after a capital increase, which requires a notary and the Mercantile Registry.

In Spanish practice an investment agreement is a term sheet and a pacto de socios plus the capital increase.

That is exactly how our Pandora project — a chain of eco-hotels in the Canary Islands ended.

An investor was ready to put in around €12m at seed stage, on condition that the project met their requirements: land, architects, a 6-year financial model, approvals from the authorities.

The agreement is signed last, and its terms are only as good as the preparation behind them.

Forward contract

Under a forward, the buyer undertakes to buy and the seller to sell a set number of shares at a fixed price in the future, regardless of what they will be worth by then.

A deposit or prepayment (margin) is usually paid at signing, and the full price on settlement.

The buyer is protected against a price rise; the seller gets a guaranteed price under uncertainty.

• Advantages: founders lock in the price of their equity and the funding in advance; it helps manage risk.
• Disadvantages: needs careful legal review to avoid unwanted consequences; parties may require collateral or guarantees.

The key difference from an option: an option buyer who has paid the premium has a right, not an obligation, to buy. Under a forward both parties must perform.

Tokenised financing: ICO and STO

Money is raised by issuing crypto tokens. An ICO (initial coin offering) issues new tokens; an STO (security token offering) issues tokens that represent securities.

• Advantages: access to international investors; tokens can trade on crypto platforms.
• Disadvantages: regulatory and technical risks — from complying with local and international rules to managing and securing the tokens.

In the EU, security tokens fall under securities law — in Spain, under CNMV supervision.

Other crypto-assets are governed by the EU Markets in Crypto-Assets Regulation (MiCA, 2023/1114).

We went through this with Darvino, an NFT platform for collectible spirits — from market research and the financial model to investor materials and post-launch accounting.

A token is not a way around the rules. It is a product that needs the same financial groundwork as a normal round.

Other instruments

Besides those above, other instruments are used too. They are rarer for early-stage startups, but it helps to know the names when an investor proposes them:

• venture debt — loans for companies that have already raised venture capital;
• preferred shares — priority on dividends or on a sale;
• convertible equity — a close relative of the SAFE;
• revenue participation loans — the Spanish equivalent is the participating loan;
• bonds, including convertible bonds and contingent convertible bonds (CoCos) — for mature companies; an SL cannot issue convertible bonds;
• credit lines;
• stock options — more often for the team than for investors;
• mezzanine financing — debt with equity features;
• royalty-based financing — payments from sales of a specific product;
• warrants — a right to buy equity later, often as a sweetener on a loan;
• venture capital as a class — fund money in exchange for equity.

Raising money before the company is registered

Professional investors almost never invest at the idea stage, before a company exists; they look for startups with at least an MVP.

In practice, though, some founders do raise money very early. They have an attractive idea, the ability to persuade, and a minimal set of documents:

• a project concept;
• a roadmap;
• a financial model;
• a commercial offer to the investor;
• a presentation and a website.

In practice we have seen five instruments used for this:

• a venture capital agreement;
• a convertible note;
• an option agreement;
• an investment agreement;
• a forward contract.

Until the company exists, such deals are signed by the future founder as an individual, or by someone acting on behalf of the future company, and they are less protected legally.

Spanish law is explicit here. A company acquires legal personality on registration (art. 33 LSC).

Those who sign contracts in its name before registration are jointly liable for them (art. 36 LSC).

The “company in formation” is only liable for acts needed for registration (art. 37 LSC).

The practical advice: if the investor is ready, register the SL first and sign afterwards — costs and timing are in How much does it cost to set up an SL in Spain.

If you have to sign before registration, the contract should state that once registered the SL takes over the rights and obligations, and that the investor’s money goes into its capital or a convertible loan.

Failing to perform such contracts can lead to civil liability — damages, penalties — and in some cases administrative liability.

From practice: three mistakes that cost founders dearly

1. Choosing the instrument from a template, not from the numbers. A SAFE or convertible “like in Silicon Valley” without calculating the founders’ stake after two or three rounds at a given cap and discount. The cap table has to be modelled before signing, not after.
2. Leaving the investor’s exit terms vague. Liquidation preference, drag-along and put options decide who gets what when the company is sold. They are easy to sign without a second look in calm times and impossible to fix during a deal.
3. Signing before the project documentation is ready. As in the Pandora project, an investor’s conditions are land, team, financial model, permits. When the project documents are weak, the investor prices the risk into the contract — and the founder pays for it.

Choosing an instrument is a financial calculation first and legal drafting second: the lawyer formalises what the parties have already agreed.

If an investor’s terms are already on the table, have them checked before you meet the lawyer. How to prepare for the conversation itself: Preparing for investor meetings.

How not to lose equity at a low valuation: Investor-ready offers: low pre-money, no collateral.

Frequently asked questions

Can you use a SAFE in Spain?

Yes. It is a valid atypical contract under freedom of contract (art. 1255 of the Civil Code). But conversion into equity still goes through an SL capital increase before a notary with registration at the Mercantile Registry, so a US template needs adapting to Spanish law.

Can an SL issue convertible bonds?

No. The law expressly prohibits an SL from issuing bonds convertible into participations (art. 401 LSC). An SL therefore uses a convertible loan as a private contract and converts it through a capital increase by set-off of the claim (art. 301 LSC).

Do you need a notary for an investor to join an SL?

Yes. A capital increase is executed in a notarial deed and registered at the Mercantile Registry, and a purchase of existing participations needs a notarial document (art. 106 LSC). The loan agreement or SAFE itself can be signed without a notary.

Is an auditor’s certificate needed to convert a loan in an SL?

No. For an SL the law requires the claim to be fully liquid and due and a directors’ report on it. The auditor’s certificate is only mandatory for an SA (art. 301 LSC).

How is a participating loan different from an ordinary loan?

Interest depends on the company’s performance, it ranks after ordinary creditors in insolvency, and for capital reduction and liquidation it counts as equity. It can only be repaid early if own funds increase by the same amount (art. 20 RDL 7/1996).

Can you raise investment before the company is registered?

You can, but it is risky for both sides: before registration the company has no legal personality and the people who sign are jointly liable (arts. 33 and 36 LSC). It is safer to register the SL first, or to state in the contract that the rights pass to the SL once it is registered.

Which instrument suits the pre-seed stage?

Usually a convertible loan or an adapted SAFE: neither requires agreeing a valuation that is almost impossible to justify at this stage. If you already have a product and revenue and do not want to give up equity, look at participating loans, including ENISA’s.

Key points on structuring investment in Spain

• In an SL the investor receives participations, not shares. New equity only appears through a capital increase before a notary, registered at the Mercantile Registry.
• Convertible loans and SAFEs postpone the valuation debate, but convert under art. 301 LSC. Think the conversion terms through when you sign.
• A participating loan is a way to raise money without losing equity when an ordinary loan is too heavy.
• Before the company is registered, the people who sign are personally liable.
• Numbers first — cap table, valuation, exit terms — then the legal paperwork.

Sources

• Ley de Sociedades de Capital (RDL 1/2010) — arts. 33, 36, 37, 106, 107, 199, 204, 296, 301, 304, 308, 315, 401.
• Real Decreto-ley 7/1996 — art. 20, participating loans.
• Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA).

This article is for information only and is not legal advice: your lawyer (abogado) handles the legal side of the deal, and we handle its economics. Checked against the legal texts as of 3 October 2026.