SAFE, Valuation Cap, Discount, & MFN Definitions
What SAFE, valuation cap, discount, and MFN mean.
SAFE (Simple Agreement for Future Equity) is an investment that converts to equity at a future priced round. A valuation cap sets the maximum valuation at which the SAFE converts, protecting early investors. MFN (most-favored-nation) lets an investor adopt better terms later granted to others. These terms determine how much equity a SAFE buys and how much founders are diluted.
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