A soft cap is a term used in the ICO and other crowdfunding spaces. People on Kickstarter use it, Gofundme, and the Initial Coin Offering space. 

When a company wants to raise funds for their cryptocurrency project, they usually start an ICO. They can do STOs (Security Token Offering) and other types of offerings. But two things seem constant: the hard cap and the soft cap.

The hard cap is the maximum amount of money the project is looking to raise. It’s the point when they run out of tokens to sell in exchange for funds. 

The soft cap is the minimum amount of funds the project needs to raise in order to start work on their project. Without raising the soft cap, the funds are (hopefully) redistributed back to everyone who bought in and the project does not start. 

There may be levels in between the soft cap and the hard cap. The soft cap could be the minimum amount necessary for the project to have a barebones blockchain running. Then as more funds are added, perhaps as the team proves the usefulness of their project, they will ask for more funds and sell more of their tokens. This can occur until their hard cap is reached. 

When you look for a project to invest in that is in its ICO or fund raising stage, make sure to check their soft cap. If they have one, make sure to check what happens if they don’t reach it. If they don’t reach it, make sure their smart contract is set up to refund the ETH, BTC, or any tokens you paid.