Equity Dilution Calculator

Model how your ownership changes through multiple funding rounds. Track dilution from new investments and employee option pools to make informed decisions about fundraising.

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Round 2

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Round 3

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Equity Dilution Analysis

Ownership Summary
Track how your ownership changes through funding rounds.
Your Initial Ownership
10.00%
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Understanding Equity Dilution

Equity dilution occurs when a company issues new shares, reducing existing shareholders’ ownership percentage. While your absolute number of shares remains the same, your relative ownership decreases as the total share count increases. This is a natural part of growing a startup through external funding.

Why is it important?

  • Fundraising Strategy: Helps you understand the true cost of raising capital in terms of ownership given up.
  • Decision Making: Allows you to model different funding scenarios and their impact on founder and employee ownership.
  • Option Pool Planning: Shows how employee stock option pools affect dilution alongside investor shares.
  • Exit Planning: Helps calculate what your stake might be worth at various exit valuations.

How Dilution is Calculated

The dilution calculation follows these steps for each funding round:

  1. Price per Share = Pre-Money Valuation ÷ Current Total Shares
  2. New Investor Shares = Investment Amount ÷ Price per Share
  3. Option Pool Shares = (Total Shares × Option Pool %) ÷ (100% - Option Pool %)
  4. New Total Shares = Previous Total + New Investor Shares + Option Pool Shares
  5. Your New Ownership % = Your Shares ÷ New Total Shares × 100

Key Terms Explained

  • Pre-Money Valuation: The company’s value before new investment
  • Post-Money Valuation: Pre-money valuation + investment amount
  • Option Pool: Shares reserved for employee stock options (ESOP)
  • Dilution: The reduction in your ownership percentage

Using the Calculator

Initial Setup

  1. Initial Total Shares: Enter the total number of shares at company founding (e.g., 10,000,000)
  2. Your Initial Shares: Enter how many shares you personally own (e.g., 4,000,000 for 40% ownership)

For Each Funding Round

  1. Investment Amount: The capital being raised in this round
  2. Pre-Money Valuation: What investors value your company at before their investment
  3. Option Pool %: Percentage of post-money shares allocated to employee options

The calculator will show:

  • Your ownership percentage after each round
  • Dilution per round and cumulative dilution
  • Current share price progression
  • Visual charts showing ownership distribution

Common Dilution Scenarios

Seed Round Example

  • Initial: Founders own 100% (10M shares)
  • Seed: $1M at $4M pre-money + 10% option pool
  • Result: Founders diluted to ~66.7% ownership

Series A Example

  • Previous: Founders at 66.7% ownership
  • Series A: $5M at $20M pre-money + 5% option pool
  • Result: Founders diluted to ~47.6% ownership

Growth Round Example

  • Previous: Founders at 47.6% ownership
  • Series B: $20M at $80M pre-money + 5% option pool
  • Result: Founders diluted to ~35.7% ownership

Important Considerations

Pro-Rata Rights

Some investors have the right to maintain their ownership percentage in future rounds by investing more. This calculator assumes new investors only.

Anti-Dilution Provisions

Certain investor protections can affect dilution calculations, especially in down rounds. This calculator uses standard dilution without such provisions.

Multiple Share Classes

This calculator assumes a single class of common stock. In reality, investors often receive preferred shares with different rights.

Vesting Schedules

Employee option pools typically vest over time. This calculator shows the fully diluted cap table as if all options were issued.

Best Practices

  1. Model Multiple Scenarios: Run different valuations and investment amounts to understand the range of outcomes
  2. Consider Total Dilution: Focus on cumulative dilution across all rounds, not just individual round impacts
  3. Plan Option Pools Carefully: Larger pools mean more dilution but may be necessary to attract talent
  4. Understand Market Standards: Research typical dilution levels for companies at your stage
  5. Negotiate Thoughtfully: Use these calculations to make informed decisions during fundraising negotiations

Remember that while dilution reduces your percentage ownership, it ideally comes with increased company value, meaning your smaller percentage could be worth more in absolute terms.