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Startups & Venture Capital

Valuation Cap

Also called: cap, SAFE cap, conversion discount

A valuation cap sets the maximum valuation at which a SAFE or note converts, so early investors get more shares if the next round prices higher. It's the mechanism that rewards early risk. A discount does similar work by pricing conversion below the round; where both exist the investor takes whichever is better, which founders should model before agreeing to either.

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