Calculating Dilution: Funding Round Calculator

The short answer

In a funding round, new shares are issued to the investor. This lowers the percentage stake of all existing shareholders, which is called dilution. The value of your shares does not have to fall: a smaller stake in a larger company can be worth more than before.

The calculation is simple: the investor receives the stake investment divided by post-money valuation. Post-money valuation is the pre-money valuation plus the investment. Someone investing EUR 1 million at EUR 4 million pre-money holds 20 percent afterwards.

Template to download: The calculation in this article is available as an Excel file for two rounds, with option pool and chart. Download the dilution calculator (Excel) For a single round there is also the free equity dilution calculator online.

Pre-money and post-money

Pre-money valuation is the value of the company before the round. Post-money valuation is the value afterwards, including the new money. The difference decides the stake: at EUR 4 million pre-money and EUR 1 million investment, post-money is EUR 5 million and the investor holds 20 percent.

The price per share follows from the number of shares: the investment divided by the new shares the investor receives. If the company has 100,000 shares before the round, about 26,000 new shares are issued in the calculation below, and the price is about EUR 38 per share.

The option pool

Many investors ask for an option pool for employees to be topped up before the round, for example to 10 to 15 percent of the shares after the round. If the pool is topped up before the round, it dilutes only the existing shareholders, not the new investor. In practice this means the effective price for the founders is lower than the pre-money valuation suggests.

What size is appropriate depends on planned hires. A rule of thumb is to size the pool for the roles to be filled before the next round. The planned roles and salaries can be put together in the headcount plan.

An example with invented numbers

Two founders hold 45 and 35 percent, a business angel 5 percent, the option pool 15 percent. There are 100,000 shares in total.

Seed round: EUR 4 million pre-money, EUR 1 million investment, option pool 15 percent afterwards. The investor holds 20 percent, the pool is topped up by about 4,600 shares. Founder A falls from 45 to 34.4 percent, founder B from 35 to 26.8 percent.

Series A: EUR 12 million pre-money, EUR 4 million investment, option pool 12 percent afterwards. The new investor holds 25 percent, the seed investor falls from 20 to 14.8 percent. Founder A then holds 25.5 percent, founder B 19.8 percent.

The numbers are invented and serve only as an illustration. What matters is the trend: after two rounds the two founders together still hold about 45 percent, although the company is valued at EUR 16 million.

The calculation in four steps

Record the starting point. Shares per shareholder and the existing option pool.
Determine the investor's stake. Investment divided by post-money valuation.
Set the pool size. The desired pool size after the round in percent; this gives how many new shares go into the pool.
Calculate the new total number of shares. The existing shareholders hold the rest after the round. The total gives the price per share and each person's stake.

What the template does not cover

Convertible loans and SAFEs. They usually convert only in the next round and then dilute further.
Liquidation preferences. They decide who gets money first in a sale, regardless of the stake.
Anti-dilution clauses. They protect investors in rounds at a lower price.
Legal drafting. The articles of association and the investment agreement prevail. That calls for legal advice.

Frequently asked questions

What does dilution mean?

Dilution means that a shareholder's percentage stake falls when new shares are issued, for example to an investor or into the option pool.

How do I calculate an investor's stake?

The stake is the investment divided by the post-money valuation. With EUR 1 million investment and EUR 4 million pre-money that is 20 percent.

What is the difference between pre-money and post-money?

Pre-money is the valuation before the round, post-money the valuation including the new money. Post-money is pre-money plus investment.

Why is the option pool topped up before the round?

If the pool is topped up before the round, only the existing shareholders bear the dilution. Investors often ask for this because their stake then does not fall after the round.

Does the template replace legal advice?

No. The template is a simplified calculation aid. The articles of association and the investment agreement prevail; legal advice is needed for that.

Read on

Sources and status

The article describes the method; all numerical examples are invented. It does not replace legal, tax or financial advice. As of October 2026.