Valuation Cap | Practical Law
Valuation Cap
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Valuation Cap
Practical Law Glossary Item 0-568-3285
(Approx. 3 pages)
Glossary
Valuation Cap
In the context of a
startup
company's
seed financing round
, a provision of a
convertible note
or
SAFE
setting a contractual ceiling on the
pre-money valuation
that will be used to calculate the price at which an investor's convertible note or SAFE converts to
equity
at the time of a future conversion event (such as a
Next Equity Financing
).
For more information on valuation caps, see
Practice Note, Startup Seed Financings: Overview
.