Article · 8 min read
Most Favored Nation (MFN) SAFEs: What Startup Founders Need to Know
Kruze Consulting Free Beginner
Kruze does startup finance and cap tables for a living, so this is the operator's take rather than a lawyer's summary. It shows the trap in one line: offer a $15M cap first, later grant a $9M cap to close a hard investor, and your MFN investors follow that $9M cap while your dilution runs well past your model. Its fix is concrete: build a simple cap-table model with multiple SAFE tranches, keep your cap-table software aligned with the actual signed documents, and limit MFN scope to cap and discount rather than every investor-favorable right.
- An uncapped MFN-only SAFE quietly hands the early investor whatever your best future cap turns out to be, so treat it as a floating claim on your best terms, not a placeholder
- Scope the MFN in the document itself to just cap and discount, otherwise later rights you grant anyone can leak back to earlier investors too
- Keep your cap-table tool reconciled to the actual signed SAFEs; a model that ignores MFN language will understate your true post-conversion dilution
