Term sheet clause 24 of 25 · SAFEs and convertible notes
MFN in a term sheet
In plain English: If you later issue SAFEs on better terms, this investor gets them too. Typical: Common on uncapped SAFEs.
Founder-friendly
No MFN with a cap.
Investor-friendly
MFN plus cap.
What to watch for
Red flag
MFN combined with a cap.
How to model it
This clause doesn't change the maths of your round, but it changes how you run the company. Discuss it with your lawyer and keep it in mind when you compare offers.
Negotiating it: safes
Principle: Cap, discount and MFN.
- Prefer post-money SAFEs: dilution is clear.
- Agree either a cap or a discount where possible, not a low cap plus a discount.
- Track every SAFE in the Cap Table as you sign.
Angel wants a lower cap than others
"We've set the cap at [X] for everyone in this round so it's fair to all investors. We'd love to have you in on the same terms."
One of the scripts from the Negotiation Playbook. The playbook has more for each topic, plus what to give and what to hold.
Not legal advice. Norms vary by country and market cycle. Have a startup lawyer review your term sheet before you sign.