A side letter is a supplementary agreement entered into between a company (or seller) and a specific investor (or buyer) that grants that party rights, protections, or economic terms beyond those provided in the principal transaction documents. Side letters are common in venture financings, fund-investor relationships, and certain M&A scenarios — and they create distinct legal and commercial considerations.
Common side-letter provisions include: most-favored-nation (MFN) clauses (granting the side-letter party automatic benefit of better terms granted to other investors); enhanced information rights (broader or more frequent reporting than other investors receive); pro-rata participation rights beyond the standard offering; fee rebates or carried-interest concessions (in fund investments); specific regulatory or compliance accommodations (particularly for sovereign wealth funds, public pension funds, or regulated institutions); and governance enhancements (additional board observer rights, consent rights over specific actions).
Side letters create disclosure and equal-treatment considerations. Other investors may assert claims if undisclosed side letters provide one investor with materially better terms; MFN provisions create chains of obligation where granting a right to one party triggers automatic grants to others. Sophisticated transactions disclose all side letters to all investors at closing or maintain a “side letter register” with disclosure obligations.
For Turkish founders structuring international rounds, side letters often address jurisdiction-specific requirements: KVKK information-sharing constraints, MASAK reporting obligations, Sermaye Piyasası Kurulu disclosure requirements, or tax residency-driven structural carve-outs. They are particularly common in rounds combining U.S. venture capital with Middle Eastern sovereign wealth or strategic family-office investors.
Vircon Legal drafts and negotiates side letters across venture financings and fund-investor relationships — coordinating with principal transaction documents, managing MFN cascades, and addressing jurisdiction-specific compliance requirements for cross-border rounds.