Startup Dilution Calculator

Dilution is what happens to an existing shareholder's percentage when a company creates new shares and gives them to someone else. Nobody takes shares away from you in a normal financing. Your share count stays exactly where it was. What changes is the size of the pie that your shares are measured against. If you own 1,000 shares out of 10,000, you own 10%. If the company issues 2,500 new shares to an investor, you still own 1,000 shares, but the total is now 12,500 and your stake is 8%.

That distinction matters because founders often talk about dilution as a loss, when it is closer to a price paid for something. A seed investor's cash, a senior engineer's option grant and a strategic advisor's equity are all paid for with a slice of future ownership. The real question is never whether you will be diluted, because almost every venture-backed founder is. The question is whether each slice you hand out buys something that makes the remaining slice more valuable than the larger slice you started with.

A dilution calculator helps you see that trade before you sign it. You enter your current ownership, the size of a planned round, the valuation, and any pool of options that must be created, and it shows the percentage you will hold afterwards. It does not tell you whether a round is a good idea. It tells you what the round costs in ownership so you can compare that cost with the time, hiring ability and runway the capital provides.

Results update as you type. Nothing is uploaded-figures stay in your browser for private scenario planning.

A smaller percentage can be worth more than a larger one, and this is the idea that makes dilution tolerable. Suppose a founder owns 100% of a company that is worth very little because it has no product and no customers. After raising money, hiring a team and finding customers, the same founder owns 40% of a company that investors value at several million dollars. The founder gave up sixty points of ownership and ended up holding something far more valuable in absolute terms.

Working this out takes only one multiplication. Ownership value is your percentage multiplied by the company's equity value at a given moment. When a financing is priced at a post-money valuation of $10 million and you hold 40%, the implied value of your stake at that price is $4 million. That number is a paper figure derived from the price the new investor paid, not cash in hand, and it ignores liquidation preferences that can change what common stockholders actually receive in an exit.

Treat the calculator output as the first half of the picture. The percentage tells you how much of the company you control and how much of any future outcome you share in. The valuation tells you what that percentage was priced at on the day of the round. Founders who look only at the percentage tend to resist capital they need, and founders who look only at the valuation tend to accept terms whose pool, preference or governance provisions cost them more than the headline number suggests.

For a straightforward priced round, the arithmetic is compact. Post-money valuation equals pre-money valuation plus the new money invested. The new investors' ownership equals the investment divided by the post-money valuation. Existing holders collectively keep one minus that fraction. So a $2 million investment at an $8 million pre-money valuation creates a $10 million post-money valuation, and the investors receive 20%. Every existing shareholder's percentage is multiplied by 0.8, which is the same as saying they each lose one fifth of their stake in relative terms.

The price per share follows from the same inputs. Divide the pre-money valuation by the number of fully diluted shares outstanding before the round, and you have the price at which new shares are sold. If there are 5,000,000 fully diluted shares and the pre-money valuation is $8 million, the price is $1.60. A $2 million investment buys 1,250,000 new shares. Add those to the original 5,000,000 and the new total is 6,250,000, of which the investor holds exactly 20%. Both routes give the same answer, which is a useful check on your own spreadsheet.

Notice that the formula depends on the ratio of money raised to post-money valuation, not on the absolute size of either number. Raising $500,000 at a $2 million post-money costs the same 25% as raising $5 million at a $20 million post-money. This is why founders can compare very different rounds by reducing each one to a single dilution percentage, and why raising slightly more money at a proportionally higher valuation can leave your ownership unchanged while extending your runway.

Fully diluted capitalization is the denominator for almost every ownership calculation in venture financing, and mistakes here are the most common reason two people calculate different answers from the same cap table. It counts all issued and outstanding shares, plus all shares that would exist if every option, warrant and convertible security were exercised or converted. It usually also counts the unissued option pool, meaning shares that have been reserved for future employees but not yet granted.

Including the unissued pool surprises people. Those shares do not belong to anyone yet, so some founders prefer to describe ownership on an issued-and-outstanding basis. Investors, though, price rounds on a fully diluted basis because they know the reserved shares will be handed out and that the pool will take a share of the company. When you compare the output of a calculator with a term sheet, check which basis each uses. A founder who holds 60% of issued shares might hold 52% fully diluted, and both numbers are correct under their own definition.

Convertible instruments add another layer. Unconverted SAFEs and convertible notes are not shares today, but the investors expect to receive shares at the next priced round. Depending on how the documents define the capitalization, those conversion shares may be counted before the new money is priced or after. The calculator on this page keeps the arithmetic transparent by letting you decide what to include, but you should confirm the definition in each document before treating any percentage as final.

The option pool shuffle is a negotiation pattern in which an investor asks the company to create or enlarge the employee option pool before the new money comes in, and to count that pool inside the pre-money valuation. The effect is that the founders and prior investors absorb the whole cost of the pool, while the incoming investor is diluted only by the money they invest. The headline valuation looks unchanged, but the price per share paid to existing holders is effectively lower.

The mechanics are easy to see with numbers. Assume a headline pre-money valuation of $12 million, and the investor insists on a pool that equals 10% of the post-round company, created before closing. If $3 million is invested, the post-money valuation is $15 million and the new pool is worth $1.5 million at the round price. Because the pool sits in the pre-money, the value attributable to existing shareholders is not $12 million but $10.5 million. That figure is often called the effective pre-money valuation, and it is the number that actually describes what existing holders were paid.

None of this means a pool is a trick. A company that plans to hire ten engineers in the next eighteen months does need shares to offer them, and investors are right to want the pool sized to that plan rather than discovered halfway through. The healthier approach is to build a bottom-up hiring plan, size the pool to roles you expect to fill before the next round, and negotiate the pool as an explicit term. Calculating with and without the pool shows you precisely how much ownership is riding on that single line.

Consider a company with 10,000,000 fully diluted shares before its seed round. The founders hold 8,000,000 (80%), earlier option grants account for 1,000,000 (10%), and an earlier angel holds 1,000,000 (10%). A seed investor offers $3 million at a $12 million pre-money valuation, which makes the post-money valuation $15 million and means the investor must receive 20%. The term sheet also requires an unallocated pool equal to 10% of the post-round company, created before the investment.

To solve this, set the post-round share count as N. The investor holds 0.20N, the new pool holds 0.10N, and the existing 10,000,000 shares make up the remaining 70%. So N is 14,285,714 shares and the price per share is $15 million divided by that figure, or $1.05. The investor receives 2,857,143 shares for $3 million and the pool contains 1,428,571 shares. The founders' 8,000,000 shares are now 56.0% of the company, the earlier options are 7.0%, the angel is 7.0%, the investor is 20.0% and the pool is 10.0%.

Without the pool, the founders would have kept 64%, so the pool request cost them eight points of ownership at the seed stage. Now suppose a Series A raises $10 million at a $40 million pre-money valuation, a $50 million post-money, and requires no further pool increase. Every existing holder keeps 80% of their prior percentage. The founders fall from 56.0% to 44.8%, which is 20% relative dilution in this round and 44% cumulative relative dilution since the beginning, even though they never sold a single share.

Three different numbers describe the same event, and mixing them up leads to confusing conversations. Percentage points measure the absolute change: going from 56% to 44.8% is a drop of 11.2 points. Relative dilution measures that drop as a share of what you held: 11.2 divided by 56 is 20%. Retention is the complement, the fraction of your previous stake you still hold, which here is 80%. Investors usually quote round dilution as a relative figure, while founders often think in points.

Retention compounds across rounds by multiplication, not addition. If you keep 80% in a seed round, 80% in a Series A and 85% in a Series B, you retain 0.8 times 0.8 times 0.85, or about 54.4% of what you owned before the seed. Adding the dilution percentages together would suggest you lost 55%, which is close here but becomes increasingly wrong as rounds pile up. A multi-round projection should always multiply retention factors rather than add the individual losses.

Use these figures to set expectations with cofounders and employees. A founder who starts with 50% of a two-person company and goes through three typical rounds will end up with a single-digit or low double-digit stake in many outcomes, and that is not a sign of failure. What matters is whether the company created enough value that a minority stake in the larger business exceeds what the founder would have owned of the smaller one. The calculator makes that bargain concrete.

Many early companies raise money on SAFEs or convertible notes before they ever price a round. Those instruments do not create shares at signing, so a basic dilution calculation run today will not show them. They still matter, because on conversion they create shares that dilute everybody who held equity before. A founder who believes they own 90% after a pre-seed may find that they own considerably less on the day the SAFEs convert into preferred stock alongside the new investors.

The size of that effect depends on the caps and discounts negotiated, and on how the document defines the capitalization used for conversion. Under the standard post-money SAFE published by Y Combinator, the holder's percentage is fixed relative to the company capitalization at the moment just before the financing, which makes the founders' dilution from SAFEs predictable as soon as the cap and amount are known. Under older pre-money forms or convertible notes with interest, the final percentage depends on factors that move until the day of conversion.

To model this properly, add the expected conversion shares to the starting cap table before applying the new round. If you have raised $600,000 on SAFEs with a $6 million post-money cap, those holders will own about 10% before the new money is added, whatever the priced round's valuation turns out to be, provided the cap binds. Treat that ten percent as dilution that has already been committed, even though it is not yet visible in the share ledger.

Founders sometimes concentrate on valuation because it is the headline number, but several other levers change dilution just as much. The first is round size: raising less reduces dilution one for one. The second is the option pool, which as we have seen can swing several points of ownership by itself. The third is the treatment of convertible securities, because deciding whether conversion shares are counted in the pre-money or post-money changes who bears them. The fourth is any secondary sale component, where founders sell some existing shares instead of the company issuing new ones.

Each lever has a cost that sits outside the calculator. Raising less money can shorten your runway and force you back to market sooner, perhaps from a weaker position. A smaller option pool can make it harder to recruit when you need people, and a pool that is too small will have to be refilled at the next round at a higher valuation than the first one, although dilution at that point is shared with investors who are by then also holders. A secondary sale can reduce the pressure on founders but may alter how investors perceive commitment.

Use the calculator to build a comparison table with three or four term-sheet variants, changing one lever at a time. Seeing that a half-point of valuation matters less than a two-point reduction in the pool tends to focus a negotiation. It also helps you decide what to give up. Founders rarely win every point, but they negotiate better when they know exactly how many ownership points sit behind each line of the term sheet.

A percentage of the economics is not a percentage of the decisions. Voting rights, board composition, protective provisions and drag-along terms determine who can approve a sale, issue new shares or change the charter. A founder holding 35% of the shares may still control the board if the charter gives common stockholders two of five seats. Conversely, a founder with 51% of the votes may find that investor consent is required before almost anything significant can happen.

Because of this, pay attention to the thresholds that matter in your own documents. Common thresholds include a simple majority of the voting power, a majority of the preferred stock voting as a separate class, and supermajority approvals for certain actions. As dilution accumulates, a founder may cross below a threshold that once gave them a blocking right. A calculator helps you anticipate when that will happen, so you can negotiate protections, such as a founder-designated board seat, before the percentage falls below the level that supported them.

It is also worth separating voting percentage from economic percentage when only some shares carry votes. Some companies use founder-friendly structures, like high-vote common stock, to maintain control through multiple rounds, though these are more common in later-stage and public companies than in early seed financings. Whatever structure applies to you, run the arithmetic for both economics and votes and write down which of the two a given contract term refers to.

Accurate dilution math starts with an accurate cap table. Reconcile it against signed stock purchase agreements, board-approved option grants, exercise records and SAFE documents. Common problems include grants that the board never formally approved, advisors promised equity in an email, early contractors who were verbally offered shares and duplicated SAFEs. Each of these can change the denominator. Fixing them before a financing is far cheaper than discovering them during an investor's legal diligence.

Option grants also need a defensible strike price. In the United States, a 409A valuation is an independent appraisal of the fair market value of a private company's common stock, used to set the exercise price of options so that they are not treated as discounted. It is generally lower than the preferred price in the latest round, because common stock lacks the preferences and protections that preferred investors receive. A fresh valuation is typically obtained after a material event such as a new financing, and companies often review it at least annually.

None of this affects the arithmetic of dilution directly, but it affects how you present the cap table to employees. People receiving options will naturally ask what the shares are worth, and the honest answer involves the difference between the preferred price, the common valuation and the exit scenario. A clean, current cap table, along with a plain explanation of fully diluted ownership, helps new hires understand what they are being offered and reduces the number of difficult conversations later. Consult counsel and a qualified valuation provider for the specifics that apply to you.