Startup Equity Dilution & Cap Table Calculator
Equity dilution is the percentage of the company a new investor receives, calculated as investment divided by post-money valuation. Enter your shares, new investment, and pre-money valuation to see your ownership after the round.
Equity Dilution
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How the Equity Dilution Works
When you raise money, new shares are issued, so existing holders own a smaller percentage of a larger company. Post-money valuation equals pre-money valuation plus the new investment. The investor stake is investment divided by post-money, and that is the dilution rate. Your new ownership equals your existing shares divided by the new total share count, which expands by the same dilution. This calculator returns your post-round percentage and the investor stake. Watch the option pool: if the pool is expanded before the round, that dilution lands on existing holders, not the new investor, a point often missed in term sheet math. Founders are usually diluted 15–25% in a seed round, with more in later rounds. Model each round separately and stack them, because dilution compounds and a small percentage early can cost you control later. Keep a simple cap table and update it every round. Model an option pool refresh in the same spreadsheet, because the timing of new shares changes founder ownership more than the nominal pool size suggests.
Formula Used
Dilution = Investment / Post-Money Valuation; Post-Money = Pre-Money + Investment
You hold 500,000 of 2,000,000 shares. A $1,000,000 investment at a $4,000,000 pre-money valuation gives a $5,000,000 post-money. New shares expand the total to 2,500,000, so you own 20%: 20% dilution.
When to Use This Calculator
- Modeling founder ownership before a term sheet.
- Explaining dilution to co-founders and early employees.
- Comparing offers with different pre-money valuations.
Common Mistakes
- Forgetting option pool expansion: A pool increase before the round dilutes founders, not the new investor, and is the most commonly missed term.
- Mixing pre-money and post-money: Dilution is investment divided by post-money, not pre-money, or you will understate the investor stake.
- Ignoring cumulative dilution: Stack every round; 20% dilution per round plus a pool refresh erodes founder ownership faster than founders expect.
Frequently Asked Questions
How is equity dilution calculated during a fundraising round?
Dilution equals new investment divided by post-money valuation, where post-money is pre-money plus the investment. The same percentage is applied to every existing holder. Option pool changes can add extra dilution on top of that figure.
What is the impact of option pool expansion on founder dilution?
If the pool is increased before the round, the new shares dilute existing holders rather than the incoming investor. The extra cost lands entirely on founders and early employees, so negotiate the pool size and timing carefully in the term sheet.
How do pre-money and post-money valuations determine ownership?
Post-money equals pre-money plus the new investment. The investor owns investment divided by post-money, and founders keep the remainder of the pre-money stake. A higher pre-money means less dilution for the same capital raised.
What is the formula for post-money valuation dilution?
Post-money valuation equals pre-money plus the new investment. The investor owns the investment divided by post-money, and that percentage dilutes every existing holder. Founders keep the remainder of their pre-money stake.
How does option pool shuffle affect founder ownership?
When a pool is expanded before a round, the new shares dilute existing holders rather than the incoming investor. Founders and early employees absorb that cost. Negotiate pool size and timing because the effect is larger than the nominal percentage suggests.
How This Page Is Reviewed
Written by the Recapflow Editorial Team and last reviewed . Every formula and worked example is cross-checked against the live calculator engine and a hand-worked example. This page is educational and does not replace professional financial, tax, or legal advice.