How do I calculate Valuation cap?

Use the formula(s) on this page. Keep inputs consistent by period and basis.

What are good benchmarks?

Benchmarks vary by model and stage. See Benchmarks on this page for ranges.

Inconsistent definitions/time windows; wrong basis (revenue vs gross profit).

GLOSSARY

Maximum valuation at which a SAFE or note converts to equity.

Protects early investors by setting a ceiling on conversion price regardless of future valuation.

If the next round valuation exceeds the cap, investors convert at the cap price, getting more shares.

$100k SAFE with $5M cap. Series A at $10M pre-money. Investor converts at $5M cap, getting 2% instead of 1%.

Setting caps too low (excessive dilution); not understanding post-money vs pre-money SAFEs; stacking multiple SAFEs at different caps.

GLOSSARY

Maximum valuation at which a SAFE or note converts to equity.

Protects early investors by setting a ceiling on conversion price regardless of future valuation.

If the next round valuation exceeds the cap, investors convert at the cap price, getting more shares.

$100k SAFE with $5M cap. Series A at $10M pre-money. Investor converts at $5M cap, getting 2% instead of 1%.

Setting caps too low (excessive dilution); not understanding post-money vs pre-money SAFEs; stacking multiple SAFEs at different caps.