equity, ycombinator, convertible-noteI’m about to raise money for my startup and I’m planning to use SAFE document.
It seems like there are 4 types of SAFE available in this page.
I’m interested in the 4th version. Safe: MFN, no Cap, no Discount
Can someone explain what is MFN in layman terms?
From my understanding 3rd version is best for Investors and the 4th version is best for Founders. Is that correct?
I have no experience personally with MFN, however it means that the current agreement will have no cap or discount. If you issue a future SAFE agreement with any of the other types 1 to 3 to later investors then the SAFE MFN will be amended to include the most favourable terms.
So the SAFE MFN is ensuring that anyone who puts their money in early and is therefore taking a a larger risk does not get a worse deal that someone who negotiates late.
3 is obviously good for the investors as they get both cap and discount.
4 gives the potential for no one having a cap or discount as long as everyone agrees.
But what is best for the investor and founder wont just depend on the price of the round. Who the investors are and what they bring to the table that will add value beyond money is often worth a cap and a discount.
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