Glossary - Soft Cap
A soft cap refers to the minimum amount of capital a company aims to raise from investors in a funding round, ICO (Initial Coin Offering), or other types of financial rounds. Unlike a hard cap, which is the maximum amount that will be raised, the soft cap is more of an initial goal. If the soft cap is not reached, funds may be returned to investors, depending on the terms of the offering. The concept is frequently used in the context of crowd-funded projects to indicate the minimum level of funding needed to proceed with the project.
Also known as
- Minimum Funding Goal
Use cases examples
- Crowdfunding Campaign Terms: The project has set a soft cap of $50,000 to cover the initial development costs and ensure a minimum viable product can be launched.
- Initial Coin Offering (ICO) Whitepaper: Our ICO targets a soft cap of 2,000 ETH, which will enable us to complete the core development of our blockchain platform.
Considerations for investors
- Evaluating the feasibility of the project reaching its soft cap and the potential impacts on their investment if it does not.
- Considering the credibility and plan of the project, particularly what the funds raised above the soft cap will be used for.
Considerations for founders
- Understanding the minimum amount of funds required to initiate their project or to reach the next critical milestone.
- Communicating clearly with potential investors about what will happen if the soft cap is not met, including potential refunds.
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