A funding round at a higher valuation can still dilute an existing shareholder’s percentage ownership significantly, even as the dollar value of their stake potentially rises.
How it works
New shares issued equal the investment amount divided by the price per share. Adding those to the pre-money share count gives the post-money total, against which every existing holder’s percentage ownership is recalculated — always lower than before, by definition.
What this does not include
This models a simple new-money round without an option pool expansion or convertible note conversion, both of which are common in real rounds and would dilute existing holders further than this basic calculation shows.
How to use this calculator
- Enter pre-money total shares and this holder’s existing shares.
- Enter the new investment amount and price per share.
Frequently asked questions
Can dilution happen even if the valuation goes up?
Yes — percentage ownership always shrinks when new shares are issued to someone else, regardless of what the round’s valuation does to the dollar value of an existing stake.
What is an option pool expansion?
Investors often require expanding the employee option pool as part of a round, which comes out of existing shareholders’ ownership (not the new investor’s), causing dilution beyond what the new investment alone would cause.
How can a shareholder avoid dilution?
By exercising pro-rata rights (if they have them) to invest additional money in the new round, maintaining their percentage ownership rather than being purely diluted by it.
