📉 Investor Dilution Calculator
See ownership after a new funding round
How Dilution Works
When a startup raises money by selling new shares, existing shareholders own a smaller percentage of the company — this is dilution. The new investor's ownership equals their investment divided by the post-money valuation. Post-money valuation is the pre-money valuation plus the new investment. If a company has an $8M pre-money valuation and raises $2M, the post-money valuation is $10M, and the new investor owns $2M / $10M = 20% of the company.
The remaining 80% is split among existing shareholders in proportion to their prior holdings. A founder who owned 100% before the round now owns 80% (before any option pool). Dilution is not inherently bad — owning 80% of a company worth $10M ($8M of value) is far better than owning 100% of a company worth $1M. The goal is to raise at valuations where the value created exceeds the ownership given up.
The Option Pool Shuffle
Investors often require an option pool (shares reserved for future employees) to be created or expanded before their investment, and crucially, calculated into the pre-money valuation. This means the option pool dilutes existing shareholders, not the new investor — a subtle but significant cost to founders. A 10% post-money option pool carved out of pre-money can effectively reduce founder ownership by an additional several percentage points beyond the headline investment dilution.
Frequently Asked Questions
What is the difference between pre-money and post-money?
Pre-money valuation is what the company is worth before the new investment. Post-money is pre-money plus the new cash. Investor ownership is always calculated on post-money: investment ÷ post-money valuation.
How much dilution is normal per round?
Seed and Series A rounds typically dilute existing shareholders by 15-25% each. Founders commonly retain 40-60% after Series A and 20-35% after multiple rounds, depending on how much capital was raised and at what valuations.
Does a higher valuation always mean less dilution?
For the same raise amount, yes — a higher pre-money valuation means selling a smaller percentage. But chasing the highest possible valuation can lead to a down round later if you cannot grow into it, which is far more damaging than modest dilution.
This simplified model does not account for convertible notes, SAFEs, liquidation preferences, or anti-dilution provisions. Consult a startup attorney or your cap table software for an authoritative analysis.