Deal Terms
Most Favored Nation
A clause ensuring an investor receives terms at least as favorable as those given to any other investor in the same or subsequent round.
A Most Favored Nation (MFN) clause guarantees that if the company offers better terms to a later investor, the MFN holder can adopt those improved terms. In venture, MFN provisions are most common in SAFE agreements, where early SAFE investors may receive MFN rights so they benefit if later SAFEs have lower valuation caps or better terms.
In Practice
An early investor signs a SAFE with a $10M cap and MFN clause. The company later issues SAFEs at a $7M cap. The MFN clause allows the first investor to adopt the $7M cap, getting more favorable conversion terms.
Why It Matters
MFN clauses protect early investors from being disadvantaged by better terms offered to later investors. They're standard in multi-SAFE raises and important for maintaining fair treatment.
Related Concepts
Further Reading
SAFE vs Convertible Note: Which Should Founders Use?
SAFEs and convertible notes both delay valuation, but their mechanics differ in ways that matter. A clear breakdown of caps, discounts, MFN, pro-rata, and when each instrument makes sense.
What Is a SAFE Note and How Does It Work?
A complete guide to SAFE notes for startup founders — how they work, key terms like valuation caps and discounts, common mistakes, and when SAFEs are the right fundraising instrument.
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