Equity Dilution Calculator

What Is the Equity Dilution Calculator?

When a company raises a new round of investment by issuing new shares, existing shareholders' ownership percentage decreases (dilutes) even though their share count stays the same. This tool calculates exactly how much.

How to Use This Tool

Enter your existing share count, current ownership percentage, the new investment amount, and the price per share for the round. New shares issued, your new ownership percentage, and the dilution appear instantly.

The Method

A Worked Example

Take the default numbers, which are entirely hypothetical. You hold 1,000,000 shares that represent 100 percent of the company. An investor puts in 500,000 at 5 per share. The new shares issued are 500,000 divided by 5, which is 100,000. Total shares before were 1,000,000 divided by 1.00, or 1,000,000. After the round there are 1,100,000 shares, and your 1,000,000 shares are worth 90.91 percent of the company. The tool reports this as a dilution of 9.09 percentage points.

A Second Case With Multiple Founders

Now imagine you hold 400,000 shares that are 40 percent of the company. The tool infers total shares before as 400,000 divided by 0.40, or 1,000,000. If the same round issues 100,000 new shares, your ownership becomes 400,000 divided by 1,100,000, or 36.36 percent, a drop of 3.64 percentage points. Notice that this is a 9.09 percent relative reduction in your stake, even though the change in percentage points looks smaller. Both views are valid; make sure you know which one someone means when they quote dilution.

Where the Inputs Come From

• Existing shares and ownership percentage: these should reconcile with the company's capitalization table. Because the tool derives the total share count from those two numbers, a mismatch between them will produce a wrong total. If you own 400,000 shares but enter 30 percent, the tool will assume 1,333,333 shares outstanding.
• Price per share: take this from the term sheet. It must be greater than zero.
• Investment amount: the new money for the round. An amount of zero produces no new shares and no dilution.

What This Calculation Leaves Out

Real financings are messier than the simple model. This calculator considers a single round of new shares at one price. It does not model an option pool increase, which is often created before or alongside a round and can dilute existing holders further. It does not model convertible notes or SAFEs converting into shares, warrants, anti-dilution provisions, liquidation preferences, or several investors joining at different prices. Each of these can change the true outcome, so treat the result as a first estimate to sanity-check a proposal, not as a substitute for a cap table model.

Percentage Is Not Value

A lower percentage is not automatically a loss. If the company is worth more after the new investment, a smaller share of a larger company can be worth more in dollars than a bigger share of a smaller one. A useful check is to multiply your new percentage by the company value after the round, if you have a credible estimate. The price per share times total shares after the round gives the implied post-money value under this model, which you can compare with what you believed the business was worth.

Using It in Negotiations

• Change the price per share to see how sensitive your ownership is to valuation. A higher price means fewer new shares and less dilution for the same cash.
• Change the investment amount to see how much money you could raise while staying above an ownership level you want to keep.
• Run the calculator once per round to project ownership through several financings, using the output ownership as the next input.

Legal and tax consequences of issuing equity can be significant. Have a qualified attorney and accountant review any actual term sheet before you sign.

Frequently Asked Questions