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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