Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A new investment round's dilution to existing shareholders is only fully captured once option pool changes and any convertible securities converting in the same round are included alongside the new investor's shares, since all three sources of new or converting shares dilute existing ownership simultaneously, not just the headline new-money investment alone.
Before you rely on it
What to check
Include option pool expansion and any converting securities in the same round's dilution calculation, not just the new investor's shares in isolation.
The common error
Where people go wrong with startup dilution calculator
Calculating dilution from the new investor's round alone while ignoring a simultaneous option pool expansion or converting notes. Both sources dilute existing shareholders in the identical round, and omitting either one understates the real dilution.
Sensitivity evidence
How pre-money valuation changes the investor post-money ownership
| Pre-money valuation | Investor post-money ownership | Holder ownership after financing |
|---|---|---|
| $6,400,000 | 23.8% | 76.2% |
| $7,200,000 | 21.7% | 78.3% |
| $8,000,000worked example | 20.0% | 80.0% |
| $8,800,000 | 18.5% | 81.5% |
| $9,600,000 | 17.2% | 82.8% |
Every input, tested
Which input moves the investor post-money ownership most
| Input | Tested from | To | Investor post-money ownership at each end | Swing |
|---|---|---|---|---|
| New investment | $1,800,000 | $2,200,000 | 18.4% to 21.6% | 3.2% (16%) |
| Pre-money valuation | $7,200,000 | $8,800,000 | 21.7% to 18.5% | 3.2% (16%) |
| Current holder ownership | 98.0% | 102.0% | 20.0% to 20.0% | none |
Two variables at once
Investor post-money ownership by pre-money valuation and new investment
| Pre-money valuation \ New investment | $1,600,000 | $2,000,000 | $2,400,000 |
|---|---|---|---|
| $6,400,000 | 20.0% | 23.8% | 27.3% |
| $7,200,000 | 18.2% | 21.7% | 25.0% |
| $8,000,000 | 16.7% | 20.0% | 23.1% |
| $8,800,000 | 15.4% | 18.5% | 21.4% |
| $9,600,000 | 14.3% | 17.2% | 20.0% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Pre-money valuation | $8,000,000 |
| New investment | $2,000,000 |
| Current holder ownership | 100.0% |
| Investor post-money ownership | 20.0% |
| Holder ownership after financing | 80.0% |
Where the inputs come from
Enter the pre-money valuation of the round, the new investment amount and the percentage owned by the holder whose dilution you are tracking, such as a founder. The tool calculates the investor's stake as the investment divided by the post-money valuation and reduces existing holders proportionally. For several rounds, run the calculation one round at a time, using the holder's ownership after each round as the starting point.
Using the investor post-money ownership in a real decision
Compare ownership with the value of the stake, not only the percentage.
When the result stops applying
The simple model excludes option pools, convertible notes, SAFEs, warrant coverage and secondary sales, all of which change the percentages. Anti-dilution and preference terms affect value. Dilution alone is not bad: a smaller share of a much more valuable company can be worth more.
What to compare it with
See the round mechanics on the pre-money and post-money calculator, and the conversion of early money on the SAFE conversion and convertible note pages. The option pool dilution calculator handles employee equity. Ask your lawyer to build a cap table before every round.
People also ask
Frequently asked questions
What is startup dilution?
The reduction in existing owners' percentage when a company issues new shares, such as to investors or for an employee option pool.
How much dilution is typical per round?
Often 15% to 25% for a priced round, and more with option pool increases. Founders' combined ownership commonly falls below 50% by a Series B.
Is dilution always bad?
No. If the new capital increases the company's value by more than the dilution, your smaller share is worth more.