Valuation cap

Also called: cap, capped SAFE, discount, conversion discount

A term in a SAFE or convertible note that sets the highest valuation used to work out how many shares the investor gets when it converts. A lower cap means more shares for the early investor. A 'discount' is a related term that gives the early investor a lower share price than new investors pay.

For example: An early investor's SAFE has a cap. The company later raises money at a valuation above that cap. The early investor's money converts as if the company were worth only the cap, so they get more shares for it.

Connects to 3

SAFE Concept
Convertible note Concept
Valuation Concept

This glossary is plain-language orientation, not legal or financial advice. Before you decide on a company structure, a contract, taxes or a fundraising deal, talk with a lawyer or an accountant.