Soft Cap

Full Definition

A soft cap is the minimum amount of capital an issuer must raise for a securities offering to be considered successful. If the soft cap is not reached by the offering deadline, the raise is typically cancelled and all investor funds are returned in full.

The soft cap represents the minimum viable funding level that allows the issuer to execute their business plan. It's a protective mechanism for both issuers (ensuring they have enough capital to proceed) and investors (guaranteeing their funds won't be deployed into an underfunded venture).

Why It Matters

On Sails.to, tokens are minted upfront and distributed to investors at subscription — but during the soft cap phase, they function as non-transferable zero-coupon bonds with funds held in escrow. This protects investors: if the soft cap isn't reached, the security redeems at par and the full principal is returned. Once the soft cap is reached, the token's permissions upgrade to a full, transferable security and the offering continues accepting investments up to the hard cap.

For issuers, setting an appropriate soft cap signals confidence and ensures you only proceed when you have the resources to deliver on your commitments.

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