It Didn't Kill the Deal. But...
One small section in a first-year side letter still gave my client's earliest investor a say at his $50 million Series C.
He raised his first real money on SAFEs — about $1.2 million, mostly small checks. The biggest, $150,000, came from an angel investor who'd had his own exit and stayed close to founders.
The angel's lawyer sent over a side letter. Most of it was ordinary. One line asked for an "evergreen" pro rata participation right — the right to buy into every future round the company ever raised, enough each time to keep his percentage from shrinking.
It didn't seem like an unreasonable ask to my client. So he signed it with the rest of the SAFE round paperwork and moved on.
About seven years later, my client raised a Series C — around $50 million, an institutional lead. By then the $150,000 was down to a fraction of a percent. But that SAFE round side letter hadn't gone anywhere.
This meant the angel investor was entitled to buy into the round. So counsel had to send him the whole financing package, wait on his sign-off, and field his lawyer's edits. And in the documents, a tiny holder from round one had room to ask for things.
Luckily, it didn't kill the deal. But it dragged the process out and ran up thousands in extra legal fees.
And I've seen worse — for instance, a lead who insists only real participants belong at the table, leaving the company to ask its early, valued angel to give up a right he thought he'd fairly bargained for by backing them when almost no one else would. That's not always a yes you get.
So this is the Side Letter ask I spend the most time on with founders. Not because it's overly aggressive — plenty of asks are obvious overreach, easy to turn down. Instead, this one looks pretty fair, a reasonable concession to someone who took a major risk early. That's what makes it easy to agree to.
Sometimes you just can't say no — you truly need that $150k. But at least don't agree to the "lasts forever" version. Offer a compromise that keeps the investor feeling valued without tangling your company's future. One example: give the right for the conversion round and the next priced round, then it ends.
As for other Side Letter asks, the answer isn't to refuse everything else, either. For example, assigning the SAFE to an affiliate is usually fine, subject to the fine print. Likewise, copies of quarterly and annual financials (but with no other inspection rights) may be reasonable if the check is large enough.
One last point. I don't make these calls — the founder does, living with the company and managing the runway. My job is to give clients clear, practical, actionable guidance on their options, and the advantages and risks of each.
There are bigger asks than this — board seats, veto rights, things that don't belong in a SAFE at all. That's next time.
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Disclaimer: This article constitutes attorney advertising. Prior results do not guarantee a similar outcome. MGLS publishes this article for information purposes only. Nothing within is intended as legal advice.