# Valuation Cap

*Startups & Venture Capital — Finicade finance glossary*

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.

**Also known as:** cap, SAFE cap, conversion discount

**Related terms:** [SAFE](https://finicade.com/glossary/safe), [Convertible Note](https://finicade.com/glossary/convertible-note), [Pre-Money vs Post-Money Valuation](https://finicade.com/glossary/pre-money-vs-post-money-valuation), [Dilution](https://finicade.com/glossary/dilution), [Cap Table](https://finicade.com/glossary/cap-table)

Source: https://finicade.com/glossary/valuation-cap