Valuation Cap
Content
Definition
A Valuation Cap is a term used in convertible notes, setting a maximum valuation at which the note will convert into equity.
Usage and Context
A valuation cap sets a maximum value at which a convertible note will change into equity.
Frequently asked questions
- What is a valuation cap on a convertible note? A valuation cap on a convertible note sets a maximum valuation at which the note converts into equity, protecting early investors from too much dilution.
- What is the maximum valuation cap? The maximum valuation cap sets the highest valuation at which a convertible note will convert into equity.
- What does cap valuation mean? Cap valuation refers to the maximum company valuation at which convertible notes or other securities will turn into equity during an investment round.
Benefits
A valuation cap sets a maximum conversion value for a convertible note, protecting investor interests.
Conclusion
A valuation cap safeguards investor interests by limiting the maximum conversion value of a convertible note.
