Equity Dilution Calculator
Understand how your ownership percentage changes when you bring in new investors or create an employee option pool.
Value of the company before the investment
Amount of capital being invested
Percentage owned by founders before this round
Percentage of shares reserved for employees (pre-money)
What is equity dilution?
Equity dilution occurs when a company issues new shares to investors in exchange for capital. While the total value of the company (valuation) typically increases, the percentage of ownership held by existing shareholders decreases. For example, if you own 100% of a company and sell 20% to an investor, you now own 80% of a potentially more valuable company.
What is the difference between pre-money and post-money valuation?
Pre-money valuation is the agreed-upon value of the company BEFORE it receives the new investment. Post-money valuation is the value AFTER the investment is added. Formula: Post-Money Valuation = Pre-Money Valuation + Investment Amount. Dilution is calculated based on the post-money valuation.
How does an Option Pool affect dilution?
An Employee Stock Option Pool (ESOP) is a set of shares reserved for future employees. When an investor requires an option pool to be created "pre-money," the dilution from those shares is borne entirely by the founders, not the new investor. This further reduces the founders' percentage before the investment even closes.
Is dilution always bad for founders?
Not necessarily. The goal of taking investment is to grow the company's value. It is better to own 10% of a $100 million company ($10M) than 100% of a $1 million company ($1M). Dilution is the price paid for the capital and expertise needed to scale the business to a much higher valuation.