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Venture Deals

What is a Valuation Cap

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May 03, 2023
What is a Valuation Cap
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Accepted Answer
May 03, 2023
A valuation cap is the price ceiling at which a SAFE or convertible note will convert into equity (usually preferred stock) at a future financing round. Valuation caps are commonly used to bridge the gap between an early-stage investment and a future priced round, providing a way for startups to raise capital while deferring the determination of an exact valuation until more information is available.

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