Valuation Cap
The maximum valuation at which a convertible converts into equity, protecting early investors.
On a SAFE, ASA or convertible note, a valuation cap sets a ceiling on the conversion price, ensuring early investors get a better share count if the next round’s valuation is high. Combined with a discount, it rewards early risk.
Examples
An ASA with a £4m cap converts favourably when the next round prices at £8m. — Investors negotiate a lower cap for more upside.
How it relates to The Startup Foundry
The Foundry helps founders structure caps and discounts fairly when raising from its SEIS/EIS investor network.