Practical guide
How successive funding rounds compound founder dilution
Model two share issues in sequence and avoid subtracting dilution percentages as though they were percentage points.
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How do you calculate dilution across several rounds?
Apply each round to the ownership and share count that exist immediately before that round. Do not repeatedly apply later rounds to the original ownership percentage or add relative dilution rates as though they were percentage-point losses.
Follow two illustrative rounds
A founder begins with 60% of 10 million shares. The company issues 2.5 million shares in round one. The founder’s percentage becomes 60% × 10 ÷ 12.5 = 48%.
Round two then issues another 2.5 million shares. Existing shares are now 12.5 million, so ownership becomes 48% × 12.5 ÷ 15 = 40%. The founder still owns 6 million shares in this simplified scenario.
Use the calculator twice: first with 10 million existing shares, 2.5 million new shares, and 60% ownership; then with 12.5 million existing shares, 2.5 million new shares, and 48% ownership.
Interpret the changes correctly
The first issue dilutes existing holders by 20% relative to their prior percentage. The second dilutes them by 16.6667%. The combined relative dilution is 33.3333%, because 40% is two-thirds of the starting 60%.
Adding 20% and 16.6667% would give 36.6667%, which does not reproduce the final ownership. The percentages act on successive bases. Alternatively, in this equal-share example, directly dividing the founder’s 6 million shares by the final 15 million verifies the 40% result.
Multiple-round questions
What if the founder also buys new shares?
This tool assumes the entered holder’s share count remains fixed during the issue. If the holder participates, calculate the new personal share count and total capitalization separately.
Are option pools and SAFEs included?
Not automatically. Actual conversion and pool terms can change the denominator and sequence. The official SAFE documents linked below explain a separate instrument; they do not turn this basic share-issue example into a full capitalization model. Use the signed terms and a complete cap table for a real round.
Use the equity dilution calculator to reproduce the scenario with your own inputs.