How to Calculate Startup Equity Dilution (2026)

Equity dilution happens every time a startup issues new shares — during a funding round, an option pool expansion, or a convertible note conversion. Your ownership percentage shrinks even though the absolute number of your shares stays the same. Understanding how much dilution each round causes is essential for founders negotiating term sheets and employees evaluating offer letters. Use the Startup Equity Calculator to do this instantly.

How Dilution Is Calculated

Dilution is the ratio of new shares issued to the total post-round share count. If a company has 10,000,000 shares outstanding and issues 2,500,000 new shares in a Series A, the post-money share count is 12,500,000. Every existing holder now owns a smaller fraction: a founder with 4,000,000 shares went from 40% to 32% — exactly 20% dilution. The formula is straightforward: new ownership = old shares ÷ (old total + new shares issued). Pro-rata rights let existing investors buy enough of the new round to avoid dilution, which is why they appear in nearly every term sheet.

Typical Dilution by Round

Dilution varies by stage and market conditions, but these ranges reflect deals closed in the US and Europe in recent years.

Option Pools and Their Hidden Dilution

Investors commonly require an option pool refresh before a round closes, which means the pool expansion happens at the pre-money valuation. This is called the "option pool shuffle" and it concentrates dilution entirely on the founders rather than spreading it across all shareholders. A term sheet that shows 20% investor dilution can effectively cost founders 28–35% once a 10–15% option pool top-up is included. Always model the fully diluted cap table — including unissued options — before signing.

Use the Startup Equity Calculator to model your cap table across multiple rounds and see exactly how much each new share issuance affects your ownership.