Most favored nation is a contractual promise of non-discrimination: if the company later issues a convertible instrument with terms more favorable to the investor (a lower cap, a discount, interest), the MFN holder may elect to amend their own instrument to those terms. The clause typically lives in uncapped SAFEs, where it substitutes for pricing: the investor accepts no cap today in exchange for inheriting whatever better deal the market later extracts. Y Combinator publishes a standard capless MFN SAFE for exactly this use.
Mechanically, the right is usually one-shot and expires at conversion: once the SAFE converts at a priced round, the MFN no longer reaches forward. It also reaches only across comparable instruments, later convertibles, not the priced round itself.
For the founder, MFN is invisible until it is expensive. The clause turns the worst-priced convertible in the stack into the effective price of every MFN instrument signed before it. The discipline is bookkeeping: keep a register of every outstanding instrument’s cap, discount and MFN status, and before signing anything cheaper than the stack, recompute the fully diluted outcome as if every MFN holder elects the new terms, because they will.