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Equity Dilution Calculator

Calculate how issuing new shares and creating option pools affects your ownership percentage.

Number of shares you currently own

Total company shares before the new issuance

Shares being issued to new investors

%

New option pool as % of pre-round shares (optional)

Enter share details, then click Calculate.

How Equity Dilution Works

Understanding Dilution

Equity dilution happens whenever a company issues new shares. The most common causes are funding rounds (issuing shares to investors), employee stock option pools, and convertible note conversions.

The Math

Dilution is straightforward to calculate:

  • New Ownership % = Your Shares ÷ (Existing Shares + New Shares + Option Pool Shares)
  • Dilution = Old Ownership % − New Ownership %

Option Pool Impact

Option pools are often the hidden source of dilution. When investors require a 15% option pool be created before their investment, that dilution comes entirely from existing shareholders — not the investors. A $5M raise at $20M pre-money with a 15% option pool means founders are actually diluted by both the investment AND the pool creation.

When Dilution Makes Sense

Accept dilution when the capital raised will increase company value by more than the ownership given up. If raising $2M at a $10M valuation (20% dilution) will help the company reach $50M in value, your remaining 80% stake grows from $8M to $40M — a 5x return despite the dilution.

Frequently asked questions

Equity dilution occurs when a company issues new shares, reducing existing shareholders’ ownership percentages. If you own 1,000 shares out of 10,000 total (10%), and the company issues 2,500 new shares, you now own 1,000 out of 12,500 (8%). Your share count didn’t change, but your percentage of the company decreased.

Not necessarily. While dilution reduces your ownership percentage, if the new shares are issued at a higher valuation, the value of your existing shares increases. Owning 8% of a $10M company ($800K) is better than owning 10% of a $5M company ($500K). Good dilution means the pie gets bigger faster than your slice gets smaller.

An option pool is a percentage of company shares reserved for future employee stock options. Typically 10–20% of total shares, the pool is created before or during a funding round. It’s used to attract and retain talent by offering equity compensation. The option pool dilutes existing shareholders but is essential for hiring.

Typical dilution per round: Seed 15–25%, Series A 20–25%, Series B 15–20%, Series C+ 10–15%. Option pool refreshes add another 5–10% dilution. By IPO, founders often retain 10–30% ownership depending on total capital raised.

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