What is Equity dilution?
Equity dilution is the reduction in your ownership percentage when your company issues new shares, for example to investors, employees or an option pool.
Formula
New ownership = current ownership × (pre-money valuation ÷ post-money valuation)
Example
You own 60%. You raise $1M at a $4M pre-money valuation, so post-money is $5M. Your new stake is 60% × 4 ÷ 5 = 48%.
Why it matters for early-stage founders
Some dilution is the price of growth, but each round compounds. Planning it keeps founders motivated and in control through later rounds.
The common mistake
Focusing only on the percentage. A smaller share of a much more valuable company can be worth far more.
Calculate your dilution
The free Equity Dilution calculator shows your stake across several rounds.
Try the calculatorRelated terms
Reviewed October 12, 2026