What Is a Side Letter?
Direct answerA side letter is a separate signed agreement that adds specific terms to an Investor's SAFE without changing the main SAFE itself. In a SAFE round, a side letter is commonly used to give an investor additional rights, such as a pro rata right, MFN provision, or information rights.
A side letter is negotiated separately with a specific investor. This means different investors in the same fundraising round can have the same standard SAFE but different side letters and therefore different rights.
Because a side letter is a separate contract, its terms need to be considered alongside the main SAFE. The fact that it sits outside the SAFE does not make it irrelevant to the Investor's overall rights.
The extra agreement beside the SAFE
A standard SAFE is designed to document the main investment terms between a Startup and an Investor.
Sometimes an investor wants an additional right that is not part of the standard SAFE. Instead of changing the SAFE itself, the company and Investor may document that right in a separate side letter.
For example, an investor might ask for a pro rata right, which gives the investor a contractual right to participate in a future financing to maintain their ownership percentage, subject to the terms of the agreement.
Another investor might negotiate an MFN provision, which may give the investor the right to receive certain more favorable terms offered in later fundraising securities.
An Investor could also negotiate information rights, observer rights, or other Investor-specific provisions.
The important point is that these additional rights do not necessarily need to be added directly to the standard SAFE. They can be documented separately in a side letter.
This means two Investors in the same round can sign the same standard SAFE while having different side letters and different additional rights.
What the SEC says, and what founders are actually asking
A side letter is a contractual document rather than a specific SEC-defined fundraising instrument. SEC EDGAR filings provide real transaction examples showing how companies use side letters alongside their primary investment agreements.
For example, a 2026 SEC filing includes a SAFE Side Letter Agreement entered into in connection with a SAFE. The filing states that the side letter granted the Investor additional rights, including information rights, notice rights, and a right to participate pro rata in a future equity financing.
A side letter is not simply an informal note attached to a fundraising document.
It is a separate agreement that records additional rights or obligations between the company and a particular Investor.
The main SAFE may therefore look identical across a round while the side letters differ.
For example:
Investor A may have only the standard SAFE.
Investor B may have a SAFE plus a pro rata side letter.
Investor C may have a SAFE plus an MFN provision.
Investor D may have a SAFE plus information rights.
The founder therefore needs to review both the SAFE and any side letter associated with that Investor when determining the Investor's complete set of rights.
In a Reddit discussion in r/ycombinator, a founder asked what a VC's standard SAFE side letter typically contains and what to consider before accepting one. A venture attorney responding in the discussion identified pro rata rights as a common provision and also mentioned confidentiality, observer rights, information rights, and major-investor classification as examples of rights that may appear in side letters.
The discussion also raised a practical concern: giving pro rata rights to many Investors can create additional administrative work when the Startup raises a future round because those Investors may need to be contacted about their participation rights.
The practical issue is not just whether a Startup has side letters.
It is knowing which investor has which additional rights.
A founder raising from several Investors may therefore have multiple documents that need to be reviewed together:
The standard SAFE
Investor-specific side letters
Any amendments to those documents
Notices or elections made under those rights
Later financing documents that trigger those rights
This becomes especially important when investors have different rights in the same round.
A side letter is a separate agreement that gives a specific Investor additional rights or terms alongside the main SAFE.
Common examples include pro rata rights, MFN provisions, information rights, and other Investor-specific terms. The same fundraising round can therefore contain Investors with identical SAFEs but different side letters.
The important distinction is that the side letter does not need to rewrite the standard SAFE to have contractual significance. It creates a separate agreement that needs to be considered together with the SAFE.
For founders, the practical challenge is keeping each side letter connected to the correct Investor and the specific SAFE it supplements.
Connect every side letter to its SAFE
A side letter becomes difficult to manage when it is stored separately from the Investor's SAFE.
Suppose a Startup has ten Investors. One has a pro rata right, another has an MFN provision, and another has information rights. The founder needs to know which additional rights belong to which Investor and which SAFE those rights relate to.
Cairnul stores each side letter against the Investor's Position and links it to the SAFE it modifies.
That gives founders a connected record of the Investor's main agreement and any additional documents associated with it.
Instead of keeping a SAFE in one folder and its side letter somewhere else, the documents remain connected to the relevant Investor and fundraising position.
Cairnul does not determine whether a particular side letter is legally enforceable or whether a specific provision should be granted. Those questions depend on the agreement and qualified legal advice.
Its role is to keep the fundraising documents and Investor-specific terms organized together.
One common misconception is that everyone in the same fundraising round should have exactly the same rights.
That is not necessarily the case.
A Startup may use the same standard SAFE for several Investors while separately negotiating additional rights with particular Investors.
This means the standard SAFE alone may not tell the complete story.
Another thing founders miss is that a side letter can affect what needs to happen later.
For example, a pro rata side letter may become relevant when the Startup raises a future financing. An MFN provision may become relevant when the Startup issues another covered security with different terms.
The side letter therefore needs to stay connected to the Investor record rather than being treated as a standalone file that can be forgotten after signing.
A final misconception is that "side letter" means informal or non-binding.
The side letter itself may be optional in the sense that the parties choose whether to enter into one. Once the parties properly execute it, however, its contractual terms need to be considered alongside the main agreement.
Keep side letters connected
Identify whether each Investor has a side letter in addition to the main SAFE.
Record which Investor signed each side letter.
Identify what additional rights or terms the side letter provides.
Link each side letter to the SAFE or other investment agreement it supplements.
Track provisions such as pro rata rights, MFN rights, information rights, and other Investor-specific terms.
Review relevant side letters when preparing a future financing or other event that could trigger those rights.
Keep signed side letters, amendments, notices, and related documents with the corresponding Investor record.
Maintain one organized record showing the complete set of documents and rights associated with each Investor.
Frequently asked questions
A side letter is a separate agreement between the Startup and an Investor that adds specific rights or terms alongside the SAFE. It does not necessarily change the standard SAFE itself.
Common examples include pro rata rights, MFN provisions, information rights, confidentiality provisions, observer rights, and other Investor-specific rights. The terms depend on what the company and investor negotiate.
No. A side letter is generally negotiated with a specific investor, so some investors in the same round may have one while others do not.
A pro rata side letter gives an investor a contractual right, subject to its terms, to participate in a future financing to maintain their ownership percentage.
SEC-filed examples show side letters granting Investors rights to participate pro rata in a future equity financing.
It can be. An MFN provision may be documented in a separate side letter rather than modifying the standard SAFE. The exact terms of the provision determine what later securities and terms are covered.
A properly executed side letter is a contract between the parties and may create binding rights and obligations. Whether a particular provision is enforceable depends on the agreement, execution, applicable law, and the facts involved.
Keep every Investor agreement connected
Cairnul helps founders organize investors, documents, and compliance in one place, so the whole raise stays clear from first sale to close. Join the waitlist to be among the first founders to run a cleaner, more organized round.
Join the waitlistDisclaimer. This content is provided for educational purposes only and does not constitute legal, tax, or investment advice. Fundraising rules, filing requirements, and fees may vary by jurisdiction and change over time. Always confirm current requirements with qualified counsel or the relevant regulator.