Equity Dilution Calculator: Understand Ownership After a Funding Round

If you’ve ever heard “you own 10% of the company” and assumed that percentage stays the same forever, you’ve already met one of the most important startup realities:

Issuing new shares changes everyone’s ownership.

That change is called equity dilution — and it shows up in fundraising rounds, option pool increases, and any situation where the total share count increases.

The Tooladex Equity Dilution Calculator helps you estimate how your ownership changes after new shares are issued, how much a new investor owns, and how many shares you’d need to buy (pro‑rata) to keep your percentage.

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What is equity dilution?

Equity dilution happens when a company creates new shares and existing holders don’t receive additional shares. Your share count stays the same, but your ownership percentage decreases because the total number of shares increases.

This is normal in startups — dilution is the tradeoff for raising capital, hiring talent with equity, or reserving shares for future employees.

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The core dilution math (simple version)

The basic ownership formula is:

• Ownership % = (your shares ÷ total shares) × 100

If the company issues new shares, total shares increases:

• Post-money total shares = pre-money total shares + new shares issued + additional reserved shares

Then your post-money ownership becomes:

• Post ownership % = (your shares ÷ post-money total shares) × 100

Tooladex shows this calculation instantly as you change inputs.

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Why dilution surprises founders (and employees)

Dilution is simple on paper, but it’s easy to misjudge because:

• Funding rounds often add multiple sources of new shares (investor shares + option pool top-ups)
• “Ownership” is sometimes discussed on an outstanding basis and other times on a fully-diluted basis
• SAFEs / notes convert later, changing share counts in ways that aren’t obvious during early discussions

That’s why it helps to run the numbers before you sign anything.

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Example: a straightforward funding round

Let’s say:

• Pre-money total shares: 10,000,000
• You own: 1,000,000 shares (10.00%)
• New shares issued to investor: 2,000,000

Post-money total shares becomes 12,000,000, and your new ownership is:

• 1,000,000 ÷ 12,000,000 = 8.33%

So you were diluted by 1.67 percentage points (from 10.00% down to 8.33%).

You can model this instantly with the Tooladex calculator.

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Option pool increases (additional reserved shares)

One of the most common founder surprises is an option pool increase as part of a financing.

An option pool increase is essentially the company reserving more shares for employee equity grants. Even if those shares aren’t immediately granted to anyone, they still increase the total share count and can dilute existing holders.

In the calculator, this is modeled as:

• Additional reserved shares

Example: investor + option pool increase

Starting from the same cap table:

• Pre-money shares: 10,000,000
• You own: 1,000,000
• New investor shares: 2,000,000
• New option pool reserve: 500,000

Post-money total shares = 12,500,000

Your post ownership:

• 1,000,000 ÷ 12,500,000 = 8.00%

Notice how the reserved shares reduced your ownership further even though they didn’t go to the investor.

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Investment-based dilution (amount + price per share)

Sometimes you don’t know how many shares are being issued, but you do know:

• the investment amount (e.g., $5,000,000)
• the price per share (e.g., $2.50)

In that case:

• New shares issued = investment amount ÷ price per share

So a $5,000,000 investment at $2.50/share creates:

• 2,000,000 new shares

The calculator supports this mode and also uses price/share to estimate:

• implied pre-money value (shares × price)
• implied post-money value (post shares × price)
• your pro‑rata cost (if you want to maintain your ownership)

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What does “pro‑rata” mean?

If you have pro‑rata rights, you may be allowed to invest in a new round to maintain your current ownership percentage.

In simple terms:

• If the company creates new shares equal to 20% of the pre-money share count, you’d need to buy about 20% more shares (relative to your current shares) to keep your ownership percentage flat.

Tooladex estimates this as:

• Pro‑rata shares to buy = your shares × (total new shares ÷ pre-money total shares)

If you also provide a price/share, it estimates the cost of buying those shares.

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Outstanding vs fully diluted shares

You’ll often see two share counts:

• Outstanding shares: shares currently issued (and sometimes excludes options not yet exercised)
• Fully diluted shares: includes options, warrants, and other convertible instruments as if converted

If you’re trying to estimate “true” ownership after a round, fully diluted is usually the better basis — but always align with the definitions used in your financing documents.

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Try the Tooladex Equity Dilution Calculator

Use the tool to:

• estimate your post-money ownership
• compare dilution across scenarios
• model option pool increases
• compute investor ownership
• estimate pro‑rata shares and cost