Pre-Money SAFE (MFN)
For Informational Purposes Only
A Most Favored Nation SAFE with no valuation cap and no discount — the purest form of trust-based early-stage investment.
What This Document Does
The MFN (Most Favored Nation) SAFE is the simplest and most founder-friendly variant of the Simple Agreement for Future Equity. It has no valuation cap and no discount — the investor converts at exactly the same price per share as the Series A investors. The only investor protection beyond the basic SAFE structure is the MFN clause: if the company later issues SAFEs with more favorable terms (such as a valuation cap or discount), this investor can retroactively amend their SAFE to adopt those terms.
This is a “pre-money” SAFE, meaning the Company Capitalization used to calculate conversion excludes the SAFE itself and other convertible instruments. When the company raises a priced round, the MFN investor simply receives shares at the Series A price — no adjustment, no special class of preferred stock, no discount calculation. The investor’s economics are entirely dependent on the company’s success between the SAFE closing and the Series A.
MFN SAFEs are sometimes called “trust SAFEs” or “clean SAFEs” because the investor is betting entirely on the founder’s integrity and the company’s growth. They are most commonly used in very early rounds where the investor and founder have a strong personal relationship — friends-and-family rounds, advisor investments, or the very first check into a company before any market pricing exists.
Why Startups Need This
Zero Valuation Debate
At the earliest stages — idea-stage, pre-product, pre-incorporation — setting any valuation is impossible. Even a “cap” implies a ceiling valuation. The MFN SAFE eliminates this entirely: there is no economic term to negotiate beyond the investment amount. This makes it the fastest possible instrument to close.
MFN as a Safety Net
The Most Favored Nation clause protects the investor without burdening the founder with valuation conversations. If the founder later issues SAFEs with a $5M cap, the MFN investor can retroactively adopt that cap. If the founder never issues better-termed SAFEs, the MFN investor converts at the Series A price. It is a self-adjusting protection mechanism.
Advisor and Relationship Rounds
MFN SAFEs are ideal for advisor investments, accelerator mentors, friends-and-family checks, and other relationship-driven capital. The investor is signaling maximum trust in the founder — they are not asking for any economic advantage over future investors. This builds goodwill and simplifies the cap table.
Bridge to a Real Round
Some founders use MFN SAFEs to raise a small initial tranche ($25K-$100K) while preparing for a larger SAFE round with a valuation cap. The MFN investors get the benefit of the cap when it is set, without the founder needing to determine pricing prematurely.
Key Provisions Explained
Most Favored Nation (MFN) Clause
This is the defining feature of this SAFE. If the company issues any subsequent SAFE or convertible security with more favorable terms — a valuation cap, a discount, or both — the company must notify this investor within a reasonable period. The investor then has 30 days to elect to amend this SAFE to incorporate those better terms. The MFN right does not apply to equity incentive plan grants, conversion of existing instruments, or shares issued in a priced round. Practical tip: Founders should maintain a register of MFN SAFEs and notify all MFN holders whenever they issue any new convertible instrument.
No Valuation Cap, No Discount
Unlike the Valuation Cap and Discount variants, this SAFE has no economic adjustment mechanism. The investor converts at the same price as the Series A investors. This means the investor receives no “reward” for investing early — unless the MFN clause is triggered by a later SAFE issuance with better terms.
Equity Financing Conversion
On a priced round, this SAFE converts into Standard Preferred Stock (not “Safe Preferred Stock”) at the Series A price per share. Because there is no cap or discount, the investor receives the identical class of stock as the Series A investors — simplifying the cap table and reducing the number of series of preferred stock the company needs to authorize.
Liquidity Event Treatment
If the company is acquired or goes public before a priced round, the investor chooses between (i) a cash return of the Purchase Amount or (ii) conversion into Common Stock at the Liquidity Price (fair market value per share based on the deal price). The default is conversion if the investor does not elect.
Dissolution Event
If the company shuts down, the SAFE investor receives their Purchase Amount back before any distribution to common stockholders, on a pro rata basis with other SAFE investors if assets are insufficient.
Pro Rata Rights
Not explicitly included in the MFN SAFE. Because the investor converts into Standard Preferred Stock at the Series A price, the investor’s pro rata rights will be governed by the Investors’ Rights Agreement executed in connection with the Equity Financing. Investors who want contractual pro rata rights before the Series A should negotiate for a separate Pro Rata Side Letter.
Emerging Provisions (2025-2026)
MFN Complexity in Multi-SAFE Stacks
As founders increasingly raise capital in multiple tranches — an MFN round, then a capped round, then perhaps another capped round at a higher valuation — the MFN notification and amendment process becomes administratively complex. Each MFN holder must be notified of each new convertible instrument, and each may elect different terms. The October 2025 NVCA guidance recommends that companies maintain a SAFE register tracking all outstanding convertible instruments, their terms, and any MFN elections made. Founders should consult their attorney before issuing any new convertible after an MFN round.
QSBS Tax Exclusion (Section 1202)
This template includes a company representation confirming aggregate gross assets do not exceed $50 million at the time of the SAFE, supporting the investor’s potential eligibility for the Section 1202 capital gains exclusion (up to $10 million or 10x adjusted basis for stock held more than five years). Because the MFN investor converts into Standard Preferred Stock at the Series A price, the QSBS basis calculation is straightforward — the investor’s basis equals the Purchase Amount, and the holding period starts at conversion.
Direct Listing and SPAC Considerations
The Liquidity Price definition in this template accounts for direct listings (using the volume-weighted average trading price over the first five trading days) rather than treating them as traditional IPOs. Founders and investors should note that MFN SAFEs converting in connection with a direct listing or de-SPAC transaction may present unique tax and securities law issues that differ from a traditional IPO conversion.
All Pre-Money SAFE Variants Compared
How to Use This Template
Download and Review
Download the .docx template and review every section with your legal counsel. Pay particular attention to the MFN clause in Section 4(d) — understand what triggers it, what the notification requirements are, and how amendments work.
Fill In Party Details
Replace all bracketed placeholders: [Company Name], [State], [Investor Name], [Date of Investment], [Purchase Amount], and contact information for both parties.
Understand the MFN Obligation
Before signing, the founder should understand that this SAFE creates an ongoing obligation: every time the company issues a new SAFE or convertible instrument with better terms, it must notify this investor and offer them the option to adopt those terms. Build this into your fundraising workflow.
Execute and Fund
Both parties sign. The investor wires the Purchase Amount. File Form D with the SEC if relying on Regulation D. Add the SAFE to your cap table as a convertible instrument (not equity) and flag the MFN obligation in your SAFE register.
Track MFN Triggers
Whenever the company issues any subsequent convertible instrument, check whether it triggers the MFN clause. If it does, promptly notify this investor with a copy of the new instrument and allow 30 days for the investor to elect to amend.
Related Forms
Disclaimer: This template is provided by Montague Law for informational and educational purposes only and does not constitute legal advice. This document is based on the Y Combinator Pre-Money SAFE form with modifications reflecting market practices as of 2025-2026, including provisions from the October 2025 NVCA Model Document updates. Use of this template does not create an attorney-client relationship. For legal advice tailored to your situation, contact Montague Law.