Valuation Cap
Noun · Startup & VC
Definitions
A maximum valuation used in instruments like SAFEs or convertible notes to determine the price at which an early investor converts into equity. A lower cap gives early investors more ownership if the next round is priced much higher.
In plain English: A limit used in early funding instruments to determine conversion into shares later.
Example: "The founder accepted the discount but negotiated hard on the valuation cap."