# What is Valuation Cap?

The highest company valuation at which a SAFE or convertible note turns into shares. A lower cap means more shares for the early investor, so it protects their stake when the next round is priced far higher.

## In real work

Diego's $50,000 converted at the $5 million valuation cap, even though the seed round priced the grant-writing startup at $20 million.

## Related terms

- [SAFE](https://prompthausapp.com/learn/safe.md)
- [Dilution](https://prompthausapp.com/learn/dilution.md)
- [Pro Rata](https://prompthausapp.com/learn/pro-rata.md)
- [Limited Partner](https://prompthausapp.com/learn/limited-partner.md)
- [Carried Interest](https://prompthausapp.com/learn/carried-interest.md)

## How is this different from Googling it?

Google gives a definition. Prompthaus pairs each term with how it shows up in standups, PRs, prompts, and design reviews. Then it quizzes you until the word sticks. One term a day on iPhone.

- Category: Venture
- HTML: https://prompthausapp.com/learn/valuation-cap
- App Store: https://apps.apple.com/us/app/prompthaus-ai-vocabulary/id6776314407