Startup Equity Dilution Calculator

Dilution is what happens to your slice of a company when new shares are issued. Your number of shares stays the same, but there are more shares in total, so your percentage falls. If the new money pushes the company's value up enough, your smaller slice can be worth the same or more.

The formula

post-money = pre-money + new investment
investor's stake = new investment ÷ post-money
your stake after = your stake before × pre-money ÷ post-money
value of your stake = your stake after × post-money
price per share = pre-money ÷ shares before the round
new shares = new investment ÷ price per share
with a pool or SAFEs: price per share = pre-money ÷ (shares before + new pool shares + SAFE shares)

Worked example

You own 50% of the company. You raise $2,000,000 at a $8,000,000 pre-money valuation.

• Post-money = $8,000,000 + $2,000,000 = $10,000,000.
• The investor gets $2,000,000 ÷ $10,000,000 = 20%.
• You keep 50% × $8,000,000 ÷ $10,000,000 = 40%. You lost 10 percentage points, which is 20% of your stake.
• Your 40% is worth 40% × $10,000,000 = $4,000,000, the same as 50% of $8,000,000 before.
• If the company has 10,000,000 shares, the price is $8,000,000 ÷ 10,000,000 = $0.80 a share, and the investor gets $2,000,000 ÷ $0.80 = 2,500,000 new shares. Your 5,000,000 shares out of 12,500,000 are 40%.

Option pool shuffle

Same round, but you and a co-founder own 60% and 40% of 10,000,000 shares, and the investor wants an option pool of 10% after the round, counted in the pre-money. The new pool and the old shares together must be worth the $8,000,000 pre-money, and the pool must be 10% of the post-money, which is 10% × $10,000,000 = $1,000,000 of the $8,000,000 pre-money (12.5%).

• Shares before the money = 10,000,000 ÷ (1 − 0.125) = 11,428,571, so the pool gets 1,428,571 new shares.
• Price = $8,000,000 ÷ 11,428,571 = $0.70 a share (not $0.80). The investor gets $2,000,000 ÷ $0.70 = 2,857,143 shares.
• Total after = 14,285,714 shares: investor 20%, pool 10%, founders 70%. You own 60% × 70% = 42% instead of 48%, and your co-founder 28%.
• The founders' 10,000,000 shares × $0.70 = $7,000,000: that is the real pre-money for you, sometimes called the effective pre-money.

SAFEs and convertible notes

A $500,000 SAFE with a $5,000,000 cap and a 20% discount converts in a round of $2,000,000 at a $10,000,000 pre-money. The cap price is $5,000,000 ÷ $10,000,000 = 50% of the round price; the discount price is 80% of it. The lower one wins, so the SAFE buys at half price and gets $1,000,000 worth of shares.

• That $1,000,000 is 10% of the $10,000,000 pre-money, so shares before the money = 10,000,000 ÷ 0.9 = 11,111,111 and the price is $10,000,000 ÷ 11,111,111 = $0.90.
• The SAFE converts at $0.45 into 1,111,111 shares. The investor buys 2,222,222 shares at $0.90.
• After: SAFE 8.33%, investor 16.67%, founders 75%. With 60% today, you end up with 45%.
• A convertible note converts its amount plus interest: $500,000 at 8% a year for 12 months converts as $500,000 × (1 + 0.08 × 12 ÷ 12) = $540,000.

Several rounds

After the pool example above (you 42%), a Series A of $10,000,000 at a $30,000,000 pre-money leaves everyone with $30,000,000 ÷ $40,000,000 = 75% of what they had. You go from 42% to 31.5%, the seed investors from 20% to 15% and the pool from 10% to 7.5%; the Series A investors own 25%. The price is $30,000,000 ÷ 14,285,714 = $2.10 a share. If the company later sells for $100,000,000, your 31.5% is $31,500,000.

How this calculator works

• Pool and SAFEs in the pre-money. The pool top-up and the SAFE and note shares come out of the existing holders' side, which is how most term sheets and pre-money SAFEs work. A YC post-money SAFE fixes its stake at investment ÷ cap instead, so it dilutes slightly differently; check its terms for exact numbers.
• The cap price uses the same share count as the round price. SAFEs and notes convert in the first round entered.
• Exit payouts are common-only. Every share gets the same amount: no liquidation preferences, participation or option strike prices are taken off. Real exits usually pay preferred investors first, so founders can get less, especially in a small sale.
• Percent mode assumes 10,000,000 shares to show a price per share. Switch to shares for your real numbers.

This is a planning tool, not legal or investment advice. Your term sheet, SAFE or shareholders' agreement decides the real numbers; ask your lawyer to check the cap table before you sign.