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.
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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.
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