Frequently Asked Questions
How does a cap table change after a funding round?
New shares are issued at the round's valuation, diluting all existing shareholders proportionally. Example: 20% round at $10M post-money issues 25% new shares (20%/(1-20%)). Existing 60% founder ownership becomes 48%. Option pool is usually expanded pre-money, diluting founders further.
What's typical founder dilution per round?
Seed: 15-25% dilution. Series A: 20-25%. Series B: 15-20%. Series C+: 10-20%. After 4 rounds, founders typically own 15-25% of original 100%. Plus option pool refreshes (10-15% each round) and any down rounds. Plan for major dilution by Series C.
Should I issue common or preferred stock?
Founders/employees get common. Investors get preferred (with liquidation preferences, anti-dilution, board rights). Standard preferred in 2025: 1x non-participating preference, weighted-average anti-dilution, optional conversion to common. Avoid 2x+ preferences and full ratchet (founder-unfriendly).
What is dilution in a startup?
It is the reduction in the ownership percentage of existing shareholders when new shares are issued in a funding round. If you own 80% of the company before the round and 60% after, you have experienced 20 percentage points of dilution.
What is the "option pool shuffle"?
It is the practice of creating or expanding the employee option pool before the investor money arrives (pre-money). This dilutes founders before the investor comes in, because the pre-money valuation already includes the expanded pool. Founders should negotiate for the pool to be calculated on a post-money basis.
What is the difference between pre-money and post-money valuation?
The pre-money valuation is the value of the company before it receives the new capital. The post-money is the value after: pre-money + amount raised. Investor percentage = amount raised ÷ post-money valuation. A common mistake is to divide by the pre-money valuation, which understates the dilution.
How does cumulative dilution work across several rounds?
Dilution multiplies: if you give up 25% at seed, 22% at Series A, and 18% at Series B, your remaining stake is 100% × (1-0.25) × (1-0.22) × (1-0.18) ≈ 48%. That is why many founders of successful companies end up with less than 15% at IPO after several rounds.
What are anti-dilution clauses?
They are provisions that protect investors in down rounds (when the valuation falls). The most common is broad-based weighted average (BBWA), which adjusts the conversion price of the investor's preferred shares based on the new, lower price. Full-ratchet, which adjusts to the lowest price of any newly issued share, is far more punitive for founders and should be avoided.
Provided by AllCalculators.io
Free online calculators for everyday. No registration required.
Estimates only. Not professional business advice.
Business Information Disclaimer: Estimates only. Not professional business advice.
This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.