# Most Favored Nation (MFN)

## Quick Definition
A provision guaranteeing an investor will receive terms at least as favorable as any subsequent investor receives.

## What is an MFN Clause?
A Most Favored Nation clause guarantees that if you give better terms to a later investor, the MFN holder automatically gets those same improved terms. It protects early investors from being disadvantaged by subsequent negotiations.

## Why MFN Matters
For SAFE investors, MFN is particularly important. If you sign a SAFE with a $10M cap and later sign one with an $8M cap, the MFN holder can adopt the $8M cap. Early investors are not penalized for moving quickly.

For founders, MFN adds complexity to future fundraising since improving terms for new investors automatically improves terms for existing MFN holders.

## MFN Scope
MFN typically applies only to economic terms like valuation cap and discount, not governance rights. Understand exactly what is covered before agreeing to MFN provisions.

## Formula
**MFN Mechanism:**  
If New Investor gets Term X at value Y  
And MFN Holder has Term X at value Z  
If Y is more favorable than Z  
Then MFN Holder automatically gets Y

## Example
Your SaaS company raises via SAFEs:
- January: $500K SAFE at $12M cap with MFN  
- March: $300K SAFE at $10M cap (no MFN)  
- May: $200K SAFE at $8M cap (no MFN)

Because January investor has MFN, they can choose to convert at the $8M cap instead of their original $12M cap. Their $500K buys significantly more equity than originally agreed.

## Related Terms

### Qualified Financing  
The minimum raise amount that triggers automatic conversion of convertible notes or SAFEs.

### Maturity Date  
The deadline by which a convertible note must be repaid or converted to equity.

### Accrued Interest  
Interest that accumulates on convertible notes over time, typically converting to additional equity.