A smaller percentage. A different company.
Dilution happens when a company issues new shares. Your existing shares do not disappear; they represent a smaller proportion of a larger total. In a primary funding round, the new investors receive a share of the company in exchange for capital.
The percentage you give up depends on the relationship between the valuation and the amount raised. Ownership percentage and economic value are different measures: a smaller stake in a more valuable company can have a greater implied value. That value remains illiquid and is not a guaranteed return.
The formula, made clear.
- Post-money valuation
- Pre-money valuation plus new primary investment.
- Your retained ownership
- Current ownership × (1 − new investor ownership).
- Dilution
- The proportional reduction in every existing holder’s percentage.
Put the numbers in context.
An $8M pre-money company raises $2M. The post-money valuation is $10M, so the new investors receive 20%. A founder who previously held 80% retains 64%.
| Input | Example value |
|---|---|
| Pre-money valuation | $8,000,000.00 |
| New investment | $2,000,000.00 |
| Your current ownership | 80% |
| Your ownership after the round | 64% |
What this calculation assumes
One priced primary round, with all existing holders diluted proportionately. No SAFEs, notes, option pool increase, secondary sales or liquidation preferences.
What to consider next.
Compare the ownership you retain with the milestones that the new capital could fund. If the round includes an option pool increase, model that separately before treating this as your final cap table.
How we approach financial models →