Founder Dilution Calculator
Find UK founder equity dilution across funding rounds.
What this calculator does
This founder dilution calculator shows what raising money does to your ownership. Enter your current shareholding percentage, the amount being invested, and the pre-money valuation, and it returns the post-money valuation, your holding afterwards, and the dilution the round costs you.
Percentage is only half the picture, which is why the post-money figure matters as much as the dilution. A round taking you from 55 to 44 percent while lifting the company's value by a quarter has left you no worse off in absolute terms. The calculator shows both sides of that trade rather than letting the percentage dominate the conversation.
When to use it
Use it while the term sheet is still under negotiation rather than afterwards. Modelling the round at different valuations and cheque sizes reveals what each negotiating point is genuinely worth — usually less than founders assume for headline valuation and more than they assume for the option pool.
It is equally useful for modelling several rounds ahead. Dilution compounds, so a founder should understand roughly where a full seed, Series A, and Series B path leaves them before committing to a venture trajectory at all. For many UK businesses the honest conclusion is that a smaller, self-funded company retains far more value for its founders.
Understanding the inputs
Starting ownership is your percentage before the round, after any earlier dilution and including the existing option pool in the fully diluted total. If advance subscription agreements or convertible loan notes are outstanding, your real starting position is lower than the register suggests, because they convert at this round.
Investment amount is the new money. Pre-money valuation is the agreed value before it arrives; post-money is the two added together, and the investor's percentage is their cheque divided by post-money. Check where the option pool sits — created pre-money, it dilutes founders alone, and that single term often costs more than a valuation difference of a million pounds.
How is this calculated?
After each round, founder % = Previous % × (1 − round dilution %). Cumulative dilution compounds across rounds.
A worked example
A founder holds 55 percent and raises £750,000 on a £3 million pre-money valuation. Post-money is £3.75 million, the investor takes 20 percent, and the founder's stake falls to 44 percent. That 44 percent is worth £1.65 million — exactly what 55 percent of £3 million was worth. The dilution cost nothing in value terms.
Two years on, a Series A raises £4 million at a £16 million pre-money. Post-money is £20 million, dilution is another 20 percent, and the founder holds 35.2 percent worth roughly £7 million. Ownership has fallen by more than a third across the two rounds while the stake's value has grown more than fourfold.
Limitations and assumptions
The model assumes clean pro-rata dilution with no complications. Real UK cap tables involve option pool expansions, advance subscription agreements converting at discounts or caps, anti-dilution ratchets on a down round, and multiple share classes carrying different rights — any of which changes the outcome materially.
It also says nothing about liquidation preferences, which frequently matter more than percentage. On a modest exit, stacked preferences can absorb most of the consideration before ordinary shareholders see anything. Model your percentage here, then have a solicitor take you through the exit waterfall under several scenarios before signing a term sheet.
Common Questions
- How much equity do UK founders typically give up per round?
- Fifteen to 25 percent per priced round is the usual range, with seed rounds sometimes higher. Add option pool expansion at each round and the cumulative effect is significant: founding teams commonly hold 40 to 60 percent after a Series A and materially less by the time a Series C completes.
- Does dilution actually leave me worse off?
- Not in itself. Holding 44 percent of a company worth £3.75 million is the same £1.65 million as holding 55 percent of one worth £3 million. Dilution destroys value only when the money raised fails to grow the business by more than the stake surrendered — which is the question worth asking.
- How do SEIS and EIS affect a funding round?
- They make UK early-stage rounds materially easier to fill, since investors receive substantial income tax relief and capital gains exemptions. The conditions are strict — on company age, trade, gross assets, and use of funds — and issuing the wrong share class or granting preferences can disqualify the investment entirely. Obtain advance assurance from HMRC first.
- What is the option pool shuffle?
- Investors frequently require the option pool to be created or expanded pre-money, so existing shareholders absorb all the dilution while the incoming investor's percentage is protected. A 10 percent pool created pre-money costs founders close to 10 percent rather than a pro-rata share. It is negotiable and worth negotiating.
- How do advance subscription agreements work?
- An ASA is the UK equivalent of a SAFE and is structured to remain SEIS and EIS compatible, which convertible loan notes generally are not. It defers valuation to the next priced round, usually with a discount and a cap. Dilution is deferred rather than avoided, and stacking several can surprise everyone at conversion.
- What are pre-emption rights?
- They give existing shareholders the right to participate in new share issues to maintain their percentage, and they are the default position under the Companies Act unless disapplied. Investors will typically want them preserved. For founders they are usually acceptable, though they can restrict room for a new lead in an oversubscribed round.
- What has to be filed at Companies House after a round?
- A form SH01 recording the allotment of shares within one month, updated articles if amended by special resolution, and the relevant resolutions. Your confirmation statement and PSC register must also reflect any change in control. Missing these filings creates real problems during diligence on a later round.
- Should I push for the highest possible valuation?
- Not automatically. A valuation you cannot grow into produces a down round later, triggering anti-dilution provisions, damaging morale, and costing far more than a few points now. It can also disqualify future SEIS or EIS participation. Raise at a price a realistic eighteen-month plan supports rather than at the maximum available.
- Why do liquidation preferences matter more than percentage?
- Because they determine who is paid first on an exit. A 1x non-participating preference means investors take their money back or convert, whichever is better. Participating preferences let them take both. On a modest exit, preferences can consume the entire proceeds whatever your cap table percentage says.