Side Letter
A separate agreement granting an individual investor specific rights outside the main financing documents.
A side letter is a standalone contract between a company and one specific investor, granting rights that aren't extended to every investor in the round — most commonly pro-rata rights, information rights, most-favored-nation protection, or a board observer seat. It exists alongside, but separate from, the main stock purchase and investor rights agreements everyone signs.
Side letters are common when a SAFE round doesn't otherwise include formal investor rights documentation, letting a company grant a strategically important investor (a fund providing real value, or one anchoring the round) extra protections without renegotiating terms for every other investor in the round.
Keep a master tracker of every side letter granted across rounds — MFN clauses in particular can quietly ripple through every prior investor's terms the moment you grant a better term to someone new, and it's easy to lose track by Series B.
What's a most-favored-nation (MFN) side letter clause?
It gives an investor the right to automatically upgrade to any better terms the company grants a later investor in the same financing round, protecting early SAFE investors from being undercut by a later, better deal.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.