Equity Dilution Calculator

Equity dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. This typically happens during fundraising rounds, employee stock option grants, or convertible note conversions. While your percentage decreases, the value of your shares may increase if the company's valuation grows. For a deeper understanding, read our startup equity dilution guide.

The option pool is typically created before a funding round and comes entirely from founder dilution, not investor dilution. Investors often require a 10-20% option pool as a condition of investment, which is factored into the pre-money valuation. This means founders bear the full cost of the pool. Negotiating a smaller pool or creating it post-round can significantly reduce founder dilution. Learn more about splitting equity in our co-founder equity guide.

Typical dilution per round: Pre-Seed (10-15%), Seed (15-25%), Series A (20-30%), Series B (15-20%). After a Series B, founders typically retain 25-35% combined ownership. Giving up more than 25% in a single round is generally unfavorable. Use our business valuation calculator to model different valuation scenarios.

Anti-dilution protection is a provision that protects investors from dilution in down rounds (when the company raises at a lower valuation). The two main types are full ratchet (adjusts the investor's price to the new lower price) and weighted average (adjusts based on the size of the down round relative to existing shares). Weighted average is more common and founder-friendly. Understanding these terms is critical when reviewing your term sheet.

Minimize dilution by: (1) Raising only what you need and extending runway through revenue, (2) Negotiating higher valuations with strong traction metrics, (3) Keeping option pools smaller and right-sized for hiring plans, (4) Using convertible notes or SAFEs with valuation caps in early stages, (5) Achieving profitability to avoid additional rounds, (6) Negotiating pro-rata rights to participate in future rounds. See how your equity split strategy affects long-term ownership.

Pre-money valuation is the company's value before receiving investment. Post-money valuation = pre-money + amount raised. For example, a $4M pre-money valuation with a $1M raise gives a $5M post-money valuation, meaning the investor owns 20% ($1M / $5M). The distinction matters because option pools are typically included in the pre-money valuation, which directly affects founder dilution. Model different scenarios with our business valuation calculator.