Dilution

Dilution is arithmetic, not punishment: your ownership percentage is your shares divided by total shares, and every time the company issues new shares, the denominator grows while your numerator stays the same. It happens on every priced round, every SAFE conversion, and every option-pool top-up — there's no way to raise primary capital without it.

What actually drives the size of the dilution

Three things determine how much you get diluted in a single event: how much new money is raised relative to the pre-round valuation, whether an option pool is being topped up alongside the round (and how big), and how many SAFEs or notes are converting at the same time. A round that raises 20% of post-money dilutes everyone by roughly 20% on its own — before the pool top-up, which typically adds several more points.

Dilution compounds across rounds

Ownership erosion isn't additive across rounds — it's multiplicative. If a seed round dilutes you to 80% and a Series A dilutes the resulting cap table by another 25%, you end up at 80% × 75% = 60%, not 80% − 25% = 55%. Foundily's dilution calculator threads a full sequence of SAFEs and priced rounds through this compounding automatically and plots your ownership at every stage.

The one dilution founders underestimate

Most founders correctly model the new investor's share of the round. Far fewer correctly model the option-pool top-up that almost always accompanies it — because the pool is conventionally created 'pre-money,' its cost is borne entirely by existing shareholders (you), not the incoming investor. See the option-pool glossary entry for the exact mechanism.