Equity Dilution Calculator
Calculate how a fundraising round affects founder and shareholder ownership. Enter your deal terms to see implied valuations and dilution impact.
How Equity Dilution Works
When a startup raises capital, new shares are issued to investors, which dilutes existing shareholders proportionally. For example, if you raise $100,000 for 10% equity:
- • Post-money valuation = $100,000 ÷ 10% = $1,000,000
- • Pre-money valuation = $1,000,000 - $100,000 = $900,000
- • A founder with 100% ownership before will own 90% after
Fundraising Terms
Frequently Asked Questions
What is equity dilution?
Equity dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. While the number of shares you own stays the same, your percentage of the total company decreases. For example, if you own 100 shares out of 1,000 (10%), and the company issues 100 new shares, you now own 100 out of 1,100 shares (9.09%).
What is the difference between pre-money and post-money valuation?
Pre-money valuation is what your company is worth before receiving new investment. Post-money valuation is the company's value after the investment is added. The formula is: Post-money = Pre-money + Investment Amount. If you're raising $1M at a $9M pre-money valuation, your post-money valuation is $10M, and investors receive 10% equity ($1M / $10M).
How do I calculate how many new shares to issue?
First, calculate the implied share price by dividing your pre-money valuation by existing shares. Then divide the investment amount by the share price. For example: If pre-money is $900,000 with 1,000 existing shares, share price = $900. To raise $100,000, you'd issue $100,000 / $900 = 111 new shares.
Is dilution bad for founders?
Not necessarily. While dilution reduces your ownership percentage, the goal is to grow the overall value of the company. Owning 60% of a $10M company ($6M) is better than owning 100% of a $1M company. The key is ensuring that each funding round increases your company's value enough to offset the dilution—this is called "accretive" fundraising.
What causes equity dilution in startups?
Common causes include: Fundraising rounds (issuing shares to investors), employee stock option pools (reserving shares for team compensation), convertible notes converting to equity, warrant exercises, and secondary offerings. Each of these events increases the total share count, diluting existing shareholders.
How much dilution is normal per funding round?
Typical dilution ranges by stage: Pre-seed: 10-15%, Seed: 15-25%, Series A: 20-30%, Series B and later: 15-25%. After multiple rounds, founders often retain 10-20% ownership by the time of an IPO or acquisition. These are general benchmarks—actual dilution depends on your negotiating position and company performance.
What is an option pool and how does it affect dilution?
An option pool is a percentage of shares reserved for employee compensation. Investors typically require a 10-20% option pool to be created before their investment (from the pre-money valuation), which means existing shareholders bear the dilution, not the new investors. This is an important negotiation point—the size and timing of the option pool significantly impacts founder dilution.
How can I minimize dilution?
Strategies to minimize dilution include: Bootstrap longer to raise at higher valuations, negotiate option pool size and whether it's pre or post-money, use revenue-based financing or debt for non-dilutive capital, hit key milestones before raising to command better terms, and consider smaller rounds more frequently at increasing valuations rather than one large dilutive round.
Track Dilution Over Time
Monitor how your ownership in public companies changes with each new filing. Get alerts when dilution events occur.
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