Concept

Valuation cap

A valuation cap is the maximum price at which a SAFE converts in a priced round. Above the cap, early money buys more ownership than new investors; below it, they convert at the round (or a discount). The cap is a dilution scenario — not a badge.

Where founders get this wrong

Raising the cap to close faster without modeling conversion at a realistic next round.
Stacking caps and discounts across SAFEs with no single ownership pro forma.
Explaining the cap as 'our valuation today' instead of a conversion floor for future equity.