Side letters: extra rights for one investor, outside the main deal.
A side letter is a short agreement between your company and one investor. It adds rights that the main documents, such as a standard SAFE, do not include.
The short answer
Side letters are common with SAFEs and with institutional investors. Typical rights are pro-rata, information rights, a most favored nation clause, or a management rights letter some funds need. Keep them standard, track them carefully, and expect later investors to read them in diligence.
How it works
Pro-rata
The right to invest in a future round to keep the investor's percentage.
Information rights
Regular financial statements or updates, on a set schedule.
Most favored nation
If later investors get better terms, this investor can take them too.
Management rights
Access to consult with management, which some funds need for regulatory reasons.
Compare the options
Who it covers
Main round documents: Every investor in the round
Side letter: One investor
Who sees it
Main round documents: All signers
Side letter: The company and that investor, until diligence
Typical contents
Main round documents: Price or cap, share terms, standard rights
Side letter: Extra rights for one investor
Main risk
Main round documents: Terms set once for all
Side letter: Obligations that pile up and conflict
Why investors ask for them
A standard SAFE does not include information rights, and pro-rata often sits in a separate letter. Institutional investors may need certain rights for their own reporting or regulatory reasons. A side letter adds these without renegotiating the main document for everyone.
Keeping them under control
Each side letter is a promise you must keep, sometimes for years. Use one standard form and offer the same rights to investors of similar size. Keep a list of every letter and what it grants. Later investors will ask to see them, and a messy set can slow a round.
Before you sign
- Is this right already in the main documents?
- Have we granted the same right to other investors?
- Does an MFN clause mean this investor gets every later improvement?
- Can we actually deliver the reporting we are promising?
Terms to know
Side letter
A separate agreement giving one investor rights beyond the main round documents.
MFN clause
Most favored nation: the investor can adopt better terms given to later investors.
Information rights
The right to receive regular financial information from the company.
Is your deck strong enough to hold standard terms?
Investors ask for extra rights when the case feels risky. Upload your deck and we show you where it needs more proof.
Questions founders ask
Do side letters have to be disclosed?
They are private contracts, but later investors usually ask for every side letter during diligence, and some terms may require notice to others. Assume they will be read.
Can I refuse a side letter?
Yes. Many small investors accept the standard documents. Offer side letters by policy, for example to investors above a set check size, not case by case.
Sources
Sources: YC post-money SAFE and pro-rata side letter; common US venture practice. Not legal advice.
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