Startup Equity Dilution Calculator
See how much your ownership stake shrinks after a funding round by entering your pre-money valuation, investment size, and current equity percentage. Essential for founders evaluating term sheets.
About this calculator
When a startup raises new capital, new shares are issued to investors, which reduces (dilutes) the percentage ownership of all existing shareholders. The post-round ownership is calculated as: newOwnership% = (currentOwnership / 100) × (preMoneyValuation / (preMoneyValuation + investmentAmount)) × 100. The ratio preMoneyValuation / (preMoneyValuation + investmentAmount) represents the fraction of the post-money company that existing shareholders retain. For example, if investors receive 20% of the post-money company, existing holders collectively retain 80%. An employee option pool created before the round (pre-money pool) further dilutes founders because it increases the share count used to compute the pre-money valuation, effectively making founders absorb all option pool dilution.
How to use
A founder owns 60% of a startup with a $4,000,000 pre-money valuation. An investor offers $1,000,000. Post-money valuation = $4,000,000 + $1,000,000 = $5,000,000. Retention ratio = $4,000,000 / $5,000,000 = 0.80. New ownership = 60% × 0.80 = 48%. Enter currentOwnership = 60, preMoneyValuation = 4,000,000, and investmentAmount = 1,000,000. The calculator confirms your stake drops from 60% to 48%, while the investor holds 20% of the post-money company.
Frequently asked questions
How does an employee option pool affect founder dilution in a funding round?
Investors typically require that an employee option pool be created or topped up before the round closes — this is called a pre-money option pool. Because the pool is created pre-money, it dilutes only the existing shareholders (usually founders) rather than being shared with incoming investors. For example, adding a 10% option pool to a $4M pre-money company means the founders' shares now represent 90% of the pre-money cap table before any investment. This is one of the most misunderstood dilution mechanics in early-stage fundraising, and founders should model the full impact before agreeing to pool size.
What is the difference between pre-money and post-money valuation in a startup funding round?
Pre-money valuation is the agreed value of the company before new investment is added. Post-money valuation equals the pre-money valuation plus the investment amount. The investor's ownership percentage is calculated as investmentAmount / postMoneyValuation. For instance, $1M invested at a $4M pre-money gives a $5M post-money valuation and a 20% investor stake. These two numbers are often confused in term sheets, and conflating them can lead founders to significantly underestimate how much of the company they are giving away.
How can founders minimize equity dilution across multiple funding rounds?
The most effective way to reduce dilution is to raise capital at higher valuations, which means building demonstrable revenue or traction before each round. Founders can also limit dilution by raising only the capital needed to hit the next value-inflection milestone rather than over-raising. Convertible instruments like SAFEs or convertible notes delay the dilution event until a priced round, giving founders time to grow valuation. Finally, negotiating smaller option pool refreshes and maintaining strong governance rights (such as pro-rata participation) allows founders to protect their economic and voting stake through later rounds.