The Equity Dilution Calculator shows how a priced financing reduces the percentage ownership of existing shareholders. It uses pre-money valuation and new investment to calculate the new investor’s post-money stake, then applies that dilution to a selected existing holder. The result helps founders, employees, and early investors compare financing scenarios before considering more complex effects such as option-pool increases, convertible securities, warrants, or multiple share classes.
1. Enter the pre-money valuation
Use the negotiated company value immediately before the new cash investment.
2. Enter the new investment
Include the amount purchasing newly issued shares in this round.
3. Enter an existing ownership percentage
Use the holder’s fully diluted percentage before the financing.
4. Review dilution and remaining ownership
The new investor percentage is the dilution rate under this simplified model.
Where:
Assumptions: The financing consists only of newly issued shares at one price and does not change the option pool or convert other securities.
Dilution is the proportional reduction in existing holders’ percentages, not necessarily a reduction in the dollar value of their holdings.
A pre-money option-pool increase can shift more dilution to existing holders than this simplified calculation shows.
Given: Pre-money valuation = $8 million, new investment = $2 million, existing founder ownership = 25%.
Calculation: Post-money valuation = $10 million. Investor ownership = $2M ÷ $10M = 20%. Founder ownership after = 25% × 80% = 20%.
Result: The round causes 20% dilution, and the founder’s stake falls from 25% to 20%.
Usually no. Your share count may stay the same while the total number of company shares increases, reducing your percentage.
In a simple new-money priced round, yes. Additional conversions or pool changes can make the cap-table impact different.
Fully diluted ownership is usually more useful for financing analysis because it includes outstanding options and other potential shares.
Yes. A smaller percentage of a better-capitalized company can be worth more if the financing increases company value.
SAFEs may convert before or during the round and create additional shares. Model those conversions separately before finalizing the cap table.