Staggered valuation caps refers to the practice of selling convertible instruments (e.g., SAFEs or convertible notes) with different valuation caps to different investors as part of the same financing. Startups may use staggered caps as an incentive for investors to commit early in a round. For instance, a startup might offer the first $500,000 of investment at an $8M valuation cap, the next $500,000 at a $10M valuation cap, and any subsequent amounts at a $12M valuation cap.
