Valuation Cap
Also called Cap
The maximum company valuation at which an early investor's SAFE or note converts into shares. It rewards them for backing you early by giving them a better price if you go on to raise at a much higher number.
Why it matters
The cap is the most negotiated term in an early round because it quietly sets how much of the company that money buys. A low cap raises now can cost you a painful chunk of ownership later.
For example
An angel's SAFE has a 15 crore cap, so even if the company later raises at 50 crore, their money converts as if the valuation were 15.
Go deeper
Related terms
Also in Starting Up
See how founders actually handle this on Raising your first round, part of the Starting Up hub.
eChai Partner Brands
