FINANCE CALCULATOR
Equity Dilution
A precise tool.
What is the Equity Dilution & How does it work?
Equity dilution occurs when a company issues new shares to investors, reducing the percentage ownership of existing shareholders. This is common during funding rounds where founders may need to sell some of their equity to raise capital.
The formula to calculate equity dilution is: [ text{Dilution} = left(1 – frac{text{Original Shares}}{text{New Total Shares}}right) times 100 % ]
[ text{Dilution} = left(1 – frac{text{Original Shares}}{text{New Total Shares}}right) times 100 % ]
var = meaning
Original Shares = Number of shares held before new funding
New Total Shares = Total number of shares after issuing new shares
Original Shares = Number of shares held before new funding
New Total Shares = Total number of shares after issuing new shares
Parameters
Result
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Frequently Asked Questions
What is equity dilution?
Equity dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders.
How do I calculate equity dilution?
Use the formula: (1 – Original Shares / New Total Shares) * 100% to calculate equity dilution.
When does equity dilution happen?
Equity dilution happens during funding rounds when a company issues new shares to raise capital.
Does equity dilution affect all shareholders equally?
Yes, equity dilution affects all existing shareholders equally by reducing their ownership percentage proportionally.
Can founders avoid equity dilution?
Founders can minimize equity dilution by retaining more shares or negotiating terms with investors during funding rounds.
Results are for informational purposes only and do not constitute professional advice.