What Is Soft Cap?

Soft cap is a term used in the cryptocurrency world to refer to an upper limit on the total amount of money that can be raised during a crowdfunding campaign. This type of funding mechanism is often used by startups and other companies looking for capital from investors. The soft cap acts as a safeguard against overfunding, ensuring that only enough funds are collected to cover necessary expenses without creating too much risk or diluting equity among existing shareholders.

The purpose of setting a soft cap is twofold: firstly, it helps protect investors from investing more than they should; secondly, it allows entrepreneurs to focus their efforts on reaching out to potential backers who will contribute at least the minimum required amount rather than wasting time trying to convince those who may not have sufficient resources available. Soft caps also help ensure that projects remain within budget and don’t become overly ambitious due to excessive investor enthusiasm. In addition, having a clear goal makes it easier for entrepreneurs and investors alike when evaluating progress towards completion of the project’s objectives.

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