The maximum valuation at which a SAFE or note converts into equity, protecting early investors from being diluted at a high later price.
The maximum valuation at which a SAFE or note converts into equity, protecting early investors from being diluted at a high later price.
The valuation cap sets the ceiling on how much a SAFE or convertible note holder's shares can be priced at. If you raise a priced round at $30M post-money and your seed SAFE had a $10M cap, the SAFE converts as if the round had priced at $10M — giving the SAFE holder a much larger ownership stake.
The cap is the single most-negotiated term at the pre-seed and seed stage. Higher caps favor the founder; lower caps favor the investor.
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