Justifying the Valuation Cap in Your Convertible Note
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In a previous article I explained what convertible notes are and when they are commonly used. Now I’d like to dive into one of the most controversial terms in many convertible notes – the valuation cap (aka – “the cap”). I say “controversial” in the context of leading to debate/negotiation between the startup and the investors. Rarely is the interest rate or term length debated. But a cap always seems to get attention.
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