A conversion price cap is the maximum valuation at which convertible debt or SAFEs convert at the time of the financing resulting in the conversion, regardless of the valuation agreed to by the company and the new equity investors. New investors sometimes look at the cap amount as a proxy for valuation at the time of the financing resulting in conversion.

It is very important to note that the conversion price cap is only one of many variables that can have a significant impact on the ownership position of investors following the financing resulting in the conversion of notes and/or SAFEs. It is important that companies consider the impact the cap might have at the time of a future fundraise.