MFN clause: if a later investor gets a better deal, so do I

• An MFN lets an early investor match better later terms.
• The YC MFN SAFE has no cap or discount of its own.
• It lets someone invest before you've set a price.
• Track MFN holders so later deals don't surprise you.

How it works

When you issue a later SAFE or note on better terms (a lower cap, a bigger discount, or extra rights), an investor with an MFN can choose to adopt those terms. Y Combinator describes its MFN SAFE as having no valuation cap or discount and taking the cap or discount of any SAFE you issue later, so an early investor can commit now without negotiating price.

Worked example (hypothetical)

In March a friend-of-the-company angel invests $25K on an MFN SAFE because you haven't set a cap. In June you raise $500K on SAFEs with an $8M post-money cap. The MFN investor can adopt the $8M cap, so their $25K converts as if they'd invested on the same terms as the June group. If you'd instead issued a later SAFE at a $6M cap to one strategic investor, the MFN holder could adopt that lower cap too.

Why it matters to a pre-seed or seed founder

An MFN is a useful way to take an early check from someone who trusts you before you're ready to price. The trade-off is that any sweetheart deal you give later can spread to every MFN holder. Keep a list of MFN investors on your cap table, check it before offering special terms, and read it with valuation cap and side letter.