Equity Dilution Calculator

Where the option pool sits changes everything.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Your ownership now

Pre-money valuation

Amount raised

Option pool created

Pool comes from pre-money

Your ownership after

72%

from 100%

Post-money valuation$2,500,000

Investor share20%

Option pool after the round8%

Value of your stake$1,800,000

A pre-money option pool dilutes only existing shareholders, so the 10% pool costs you 10% before the investor's share is even applied. Whether the pool sits pre- or post-money is one of the most consequential terms in any round.

How the Equity Dilution Calculator works

A pre-money option pool dilutes only the existing shareholders, so it costs the founders before the investor's share is even applied. Whether the pool sits pre- or post-money is one of the most consequential terms in any round and one of the least discussed.

Also known as: share dilution calculator · ownership after funding round · cap table dilution

What dilution actually is

Issuing new shares increases the total in existence, so each existing share represents a smaller proportion of the company. That is dilution, and it happens whenever new equity is created.

The arithmetic is straightforward: your shares divided by the new total. Holding 800,000 shares of a million, then 400,000 new shares are issued, leaves you with 800,000 of 1.4 million, or 57% rather than 80%.

The percentage fell and the value may not have. Dilution matters in terms of what the smaller percentage is worth, which depends entirely on what the company received for the new shares.

Pre-money and post-money

Pre-money valuation is what the company is agreed to be worth before the investment. Post-money is pre-money plus the amount invested.

The investor's percentage is their investment divided by the post-money valuation. £250,000 at a £1 million pre-money gives a £1.25 million post-money and a 20% stake.

Confusing the two is a common and expensive error. The same £250,000 at a £1 million post-money valuation means a £750,000 pre-money and a 25% stake. That is five percentage points of the company, and the difference comes entirely from which word appeared in the term sheet.

Option pools and where they come from

Investors typically require an option pool for future employees, and the negotiation is over whether it is created before or after the investment.

Created pre-money, the pool dilutes the founders alone. Created post-money, it dilutes everyone including the new investor. The difference is substantial and it is frequently not discussed explicitly.

A 12% pool created pre-money on the example above means the founders are diluted by both the pool and the investment, and the effective founder stake after a nominally 20% round can be considerably below 80%. Modelling the fully diluted position rather than the headline percentage is what makes the term sheet comparable to another one.

Convertibles, and the dilution that arrives later

Convertible notes and SAFEs defer the valuation, converting into equity at a later round, usually at a discount or subject to a cap.

That means the dilution is real and invisible until conversion. A company with £400,000 of notes outstanding has already sold equity; the amount is simply not yet determined.

The valuation cap is what determines it, and a low cap combined with a high subsequent round produces far more dilution than founders expect. Modelling the conversion at several possible round valuations before signing is the exercise that prevents the surprise, and it is skipped often because the note feels like debt rather than equity.

Whether the dilution is worth it

The test is whether a smaller share of the enlarged company is worth more than the larger share of the smaller one. That is a judgement about what the money will achieve.

Investment that funds something with a clear return, inventory for demonstrated demand, a channel that is proven at smaller scale, is easier to justify than investment that funds general operation.

For most ecommerce businesses the honest comparison is against debt. Equity is permanent and expensive; a loan is temporary and cheaper if the business can service it. Founders who raise equity for working capital that a facility would have covered have sold part of the company to solve a timing problem, which is the most expensive way to solve one.

Where to go next

The Equity Dilution question rarely arrives on its own. These are the ones that usually come with it:

Ecommerce Business Valuation Calculator — The multiple is driven by durability, not size.
Cash Runway Forecast Calculator — The lowest balance is what matters.
Business ROI Calculator — Annualised, and with a present value beside it.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

How is dilution calculated?

The investment divided by the post-money valuation gives the investor's share. Everyone else is diluted by that proportion, applied after any option pool adjustment.

What is the option pool shuffle?

Creating the option pool from the pre-money valuation, so existing shareholders bear all of it. It is standard practice and worth negotiating, because the effect is larger than most founders expect.

What is the difference between pre and post money?

Pre-money is the valuation before the investment; post-money adds the investment. A £2m pre-money with a £500,000 raise is a £2.5m post-money, and the investor owns 20%.