Applications - Equity Dilution Calculator

EQUITY DILUTION CALCULATOR.

This calculator shows how to determine a founder's equity dilution after a single round of fundraising/capital increase. You can change any of the values below, and this will auto-update all other inputs.

background

At the beginning of a startup journey, founders own the full number of the startup's issued shares, with each founder's ownership stake represented as a percentage. This percentage is calculated as (shares owned / total shares * 100). As startups grow, founders may create option pools, give share options to advisors, employees, board directors as remuneration for their work, sign convertible debt with noteholders, and investment term sheets investors to receive capital. Along this journey, startups usually maintain a capitalization table, that shows the breakdown of equity ownership by stakeholders and the type of equity they possess e.g. common shares, preferred shares, ... etc. The sum of all individual equity stakes equals to 100%.

an example

Let's assume we have a startup with 1000 issued shares. When this startup announces a fundraising-round e.g. "£100,000 for 10%" this means that

1. the startup post-money valuation will be (100% / 10%) * £100,000 = £1,000,000
2. the startup pre-money valuation is £1,000,000 - £100,000 = £900,000
3. the startup issues 111 new shares priced at £900,000 / 1000 = £900

After fundraising has been completed, the startup's total numbers of shares will be 1000 + 111 = 1111. With additional shares issued, the equity stakes of shareholders (founders, advisors, employees, board directors, ... etc) are diluted ie.. diminish proportionally to the equity sold to investors.

equity dilution calculator

To use the calculator, simply enter the currency, the amount you are raising, the post-money equity percentage you are offering to investors, and the number of shares issued before the fundraising round. The calculator will compute all other values.

Currency := GBP, EUR, USD

 

Seeking Investment of

 

for an Equity Stake of
 %

 

Existing Shares

 

Implied Shares Price

 

Implied Pre-money Valuation

 

Implied Number of New Shares
shares

 

as a Percentage of Pre-money Valuation
 %

 

Post-money Valuation

 

A shareholder with
shares

 

with Pre-money Equity of
 %

 

will be diluted to
 %

 

Calculate

CREDITS & REFERENCES

For the avoidance of doubt, Neos Chronos is not affiliated with and has no financial interest in any of the companies mentioned in this article. All names and trademarks mentioned herein are the property of their respective owners. Please observe the Neos Chronos Terms of Use.

1. Wikipedia: Pre-money valuation, Post-money valuation
2. Other tools: Margin and Markup Calculator, Sales Revenue Target Calculator

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