Startup Equity Calculator

Founder equity does not fall by a fixed amount each round. It falls by a fixed share of whatever is left, which is why the arithmetic runs away from people. A sole founder starting at 100% who gives up 20% in each of four rounds does not end at 20%. The stake is 100% × 0.8^4, or 40.96%, and total dilution is 59.04%. On a 100,000,000 exit that stake is worth 40,960,000.

Order does not matter, but the average does

Because the rounds multiply rather than add, their sequence makes no difference to the total. A 15% round, a 25% round and a 20% round leave 0.85 × 0.75 × 0.8 = 0.51 of the original stake in whichever order they arrive. The single uniform rate that reproduces the same 51% over three rounds is 20.1%, slightly above the 20% average of the three, because what compounds is the fraction retained and its geometric mean sits below the arithmetic one. Feeding the plain average of a real sequence into this calculator therefore understates the damage a little, every time.

Each additional round takes its share of a smaller base, so the percentage cost stays constant while the cash cost does not. Moving from four rounds to five at 20% takes the stake from 40.96% to 32.77%, which on the same 100,000,000 exit is 8,192,000 less. The fifth round costs a fifth of what survived the first four, and the tenth costs a fifth of much less again.

Where the option pool hides

A funding round and an option pool refresh are separate dilution events that often land in the same quarter, and the single rate this calculator takes has to carry both. A 20% round with a 10% pool on top is 0.8 × 0.9 = 0.72 per round, not 0.7. Four of those leave 26.87% rather than 40.96%, or 26,873,856 on the same exit. Which side of the round the pool is created on decides who carries it: a pool established before the money arrives comes out of the existing holders alone, while one created afterwards is shared with the incoming investor. The NVCA model financing documents, the templates a large share of venture rounds are papered from, are where the pool, the anti-dilution formula and the preference stack are actually defined.

Fully diluted is the figure the tool wants

Ownership read off the current share register flatters the holder, because it ignores every share that exists on paper but has not been issued: unexercised options, warrants, convertible notes and SAFEs. IAS 33, the accounting standard on earnings per share, defines dilution as the reduction that follows from assuming convertible instruments are converted, options and warrants exercised, and contingently issuable shares issued. That assumption is the whole of the fully diluted figure, and it is what the initial equity field is asking for.

What the model leaves out

Two simplifications matter more than the rest. The first is that every round dilutes at the same rate, which no real sequence does; the uniform equivalent above is a closer stand-in than the plain average of the actual rates. The second is larger. Exit proceeds here are the stake multiplied by the whole valuation, which assumes every share is paid the same price. Preferred shares usually carry a liquidation preference paid before the common sees anything, so on a 100,000,000 exit with 80,000,000 of preference ahead of it the common divides 20,000,000, not 100,000,000. Anti-dilution ratchets, participating preferred, secondary sales and pro-rata follow-ons sit outside the model as well. The percentage it returns is a ceiling on ownership, and the cash figure is a ceiling on proceeds.