MFN Clause: In a most favored nation (MFN) clause, if subsequent convertible securities are issued to future investors at better terms (e.g., a lower valuation cap), the better terms will automatically apply to the investor's SAFE. This clause falls away on conversion of the SAFE into company stock.
Its a Simple Agreement to Future Equity. It's a fundraising instrument where the investor agrees to give the company money in exchange for some amount of equity to be decided at a future date. It's designed to make it easier for founders to get capital at the early stages without having to negotiate valuation.
The best thing to do is to actually read SAFE templates, they are self-explanatory. Pretty much now these are standard instruments for early-stage investing for everyone, not only YC, so investor or founder you’ll see them a lot.
Prior to the SAFE, a lot of startups raised using convertible debt, which had a bunch of strings attached (convertible notes typically have an interest rate, a cap, and a discount). SAFE was an attempt to make this simpler and more founder friendly.
MFN, at least, is a standard and common term-of-art in contracts and can apply to all kinds of things where a party wants to guarantee that no one else gets a better deal.
> is a standard and common term-of-art in contracts
the reason this isn't exactly helpful is because everyone says that about everything contract related. thats the user experience of being presented a contract whether it is true or not.
got a list? is there a document on clause etymology?
I'm pretty sure that the "most favored nation" term goes back to international tariffs.
Among the nations your nation trades with, some are your "customs buddies" (not a real term :-)), for whatever reason -- there's a lot of reciprocal trade, you're allies in war, the other nation is scary enough to shake you down... Those nations get lower customs rates. The nations that get the best rates are the "most favored nations". When countries negotiate new trade agreements, a common demand is for "most favored nation status", i.e., that you won't charge them any more than the lowest rate you charge the "most favored" country.
