How dilution works
- Post-money = pre-money + investment. The investor’s stake is investment ÷ post-money.
- Price per share = pre-money ÷ fully diluted shares before the round (including any pool top-up).
- The option-pool shuffle: when investors ask for the pool to be topped up before the round, the new options dilute only existing holders — effectively lowering your real pre-money. The calculator shows that “effective pre-money”.
- More on negotiating it: term sheets explained · startup funding guide.
Frequently asked questions
How do you calculate dilution in a funding round?
Divide the investment by the post-money valuation (pre-money plus investment) to get the new investor's stake; existing holders' percentages fall proportionally. If an option pool is created before the round, it dilutes existing holders further.
What is the option pool shuffle?
Creating or topping up the employee option pool before the round, so the new options dilute only the founders and existing investors rather than the new investor — which lowers the effective pre-money valuation.
How much dilution is normal in a seed or Series A round?
It varies with valuation and amount raised, but founders commonly sell roughly 10–25% per round; model each round, including the option pool, before agreeing terms.