Article · 12 min read

SAFEs vs. Convertible Notes

EquityList Free Beginner India

EquityList runs cap tables and ESOP admin for Indian startups, so this places MFN inside the instrument choices an Indian founder actually faces. It states the mechanic cleanly (if a future SAFE gets a lower cap or bigger discount, MFN holders can adopt it) and, crucially, frames the India reality: SAFEs are not native to Indian company law, so you are usually running convertible notes (DPIIT-recognized startup, minimum 25 lakh cheque), where the same most-favored logic applies to the cap and discount you can later offer.

• In India you are typically issuing convertible notes, not US SAFEs (DPIIT recognition and a 25 lakh minimum apply), but the MFN backward-repricing risk on cap and discount carries over unchanged
• MFN means any better term you later grant can be claimed by earlier holders, which directly narrows the room you have to sweeten a bridge or close a reluctant investor
• Read every early instrument's conversion mechanics side by side before your next raise, because MFN plus pro-rata rights compound founder dilution when they all converge on the most protective terms