A valuation cap sets the maximum price per share used for your conversion, protecting you if the next round is priced high. A discount gives you a percentage reduction (e.g., 20%) to the next round price. Most instruments convert at the better of cap or discount. With post‑money SAFEs, the cap effectively targets a specific ownership percentage before the priced round (e.g., $500k into a $10M post‑money SAFE ≈ 5% pre‑financing ownership). Two gotchas:
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● Stacking SAFEs/notes: too many can over‑dilute founders and confound conversion math.
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● Option pool/round size: new options or large rounds will dilute everyone post‑conversion.

Always request a simple conversion model from the company so you can see pre‑ and post‑financing ownership.