Option Pool Dilution Calculator

1. Enter the pre-money valuation, the investment and the fully diluted shares outstanding before the round.
2. Enter the new option pool as a percent of the company after the round, and your own share count.
3. Switch the pool timing between pre-money and post-money to see who carries the pool dilution.

Option pool dilution is the fall in each existing shareholder's ownership percent when a company sets aside new shares for future employee equity grants. The shareholder keeps the same number of shares. The total share count grows around them.

An option pool is a block of shares reserved for employees, advisers and other service providers. Companies often create or enlarge the pool as part of a priced funding round.

The timing matters. A pool created before the investment is counted inside the pre-money valuation, so only the existing holders are diluted by it. A pool created after the investment dilutes everyone, including the new investor.

The calculator handles one priced round with one new pool. It is a planning model for founders, early employees and investors. It is not a legal cap table.

The calculation fixes the investor percent first, then places the pool on one side of the investment or the other.

1. Post-money valuation = pre-money valuation + investment.
2. Investor percent at the close = investment / post-money valuation.
3. Pre-money pool: total shares after = existing shares / existing percent. Price per share = post-money valuation / total shares after.
4. Post-money pool: price per share = pre-money valuation / existing shares. The pool is then added so that it equals the pool percent of the new total, which scales every holder down by the same factor.
5. Your stake after = your shares / total shares after.

The gap between the two timings for existing holders is the investor percent times the pool percent. With a 20 percent investor and a 20 percent pool, that gap is 4 points.

This example uses the figures from the 2007 essay that gave the option pool shuffle its name. A company has 6,000,000 shares. It raises $2,000,000 at an $8,000,000 pre-money valuation with a 20 percent pool.

Pre-money pool. Post-money is $10,000,000 and the investor gets 20 percent. Existing holders keep 100 - 20 - 20 = 60 percent. Total shares become 6,000,000 / 0.60 = 10,000,000. The price is $10,000,000 / 10,000,000 = $1.00 a share. The pool is 2,000,000 shares. The effective pre-money valuation is $8,000,000 - $2,000,000 = $6,000,000.

Post-money pool. The price is $8,000,000 / 6,000,000 = $1.3333. The investor gets 1,500,000 shares. A pool of 1,875,000 shares then makes 20 percent of 9,375,000. Existing holders keep 64 percent and the investor 16 percent.

A founder with 3,000,000 shares goes from 50 percent to 30 percent with the pre-money pool, or to 32 percent with the post-money pool.

Pool Size

Each point of pre-money pool is a point taken from existing holders. It also lowers the share price, because the same valuation is spread over more shares.

Pool Timing

Moving the pool from pre-money to post-money hands part of its cost to the new investor. The share moved equals the investor percent times the pool percent.

What the Pool Percent Is Measured Against

Term sheets normally state the pool as a percent of the post-financing fully diluted capitalization. A 20 percent pool on that basis is 25 percent of an $8,000,000 pre-money valuation in the example above.

The Share Count You Start From

Use the fully diluted count, with granted options and other rights included. Leaving them out overstates your starting percent.

An Existing Unused Pool

Unissued shares in a current pool usually count toward the new target. Then only the top-up is new dilution. Enter the top-up percent to model that case.

A pre-money pool costs existing holders more than a post-money pool of the same size. The table uses the worked example: $8,000,000 pre-money, $2,000,000 invested and 6,000,000 existing shares.

Convertible instruments add another layer. The SAFE note dilution calculator models that step on its own.

Reading a Term Sheet

A term sheet states a pre-money valuation and a pool percent. Enter both to see the share price and the valuation placed on the existing shares.

Comparing Two Offers

One offer has a higher valuation and a larger pool. Another has a lower valuation and a smaller pool. Run both and compare your ownership after each.

Sizing a Pool from a Hiring Plan

Add up the grants you expect to make before the next round. Enter that total as the pool percent and see what it costs existing holders.

Explaining Dilution to a Team

Enter an employee's share count to show their percent before and after. The percentage calculator helps with any single ratio.

1. Dividing Pre-money Valuation by Existing Shares

With a pre-money pool the price uses existing shares plus the new pool. In the example the price is $1.00, not $1.33.

2. Measuring the Pool Against the Wrong Total

A 20 percent pool means 20 percent of the company after the round. Adding 20 percent of the current share count gives a smaller pool than the term sheet asks for.

3. Treating Both Timings as Equal

They are not. The same 20 percent pool leaves existing holders 60 percent pre-money and 64 percent post-money in the example.

4. Counting Only Issued Shares

Granted options, warrants and notes that convert belong in the fully diluted count.

5. Reading Percent as Value

A smaller percent of a company with more cash can be worth more. Ownership percent and share value are separate questions. The present value calculator deals with what future money is worth today.

6. Forgetting That Unused Pool Shares Are Not Gone

Unissued pool shares belong to nobody yet. The model still counts them in the fully diluted total, as term sheets do.

The arithmetic is exact for one priced round and one new pool. Real financings contain terms this model leaves out.

A pre-money pool is counted inside the pre-money valuation, so only existing holders are diluted by it. A post-money pool is created after the investment, so the new investor is diluted too.

With a pre-money pool, subtract the investor percent and the pool percent from 100 percent. A 20 percent investor and a 15 percent pool leave existing holders 65 percent.

The option pool shuffle is the practice of placing a new option pool inside the pre-money valuation. It lowers the share price and the value placed on the existing shares.

A pre-money pool adds shares before the price is set, so the price falls. At $8 million pre-money with 6 million shares, a 20 percent pool moves the price from $1.33 to $1.00.

It is the pre-money valuation minus the value of the new pool. An $8 million pre-money with a $2 million pool gives a $6 million effective valuation.

A pre-money pool does not dilute the new investor. A pool created or enlarged after the round dilutes every holder in proportion, including investors.

No single size is correct. Guides suggest building the number from a hiring plan up to the next round instead of accepting a round figure.

Yes. Fully diluted counts usually include the whole reserved pool, both granted and ungranted.

No. It models one priced round and one new pool. Notes and SAFEs convert into extra shares and need their own step.

No. The calculator runs in your browser and nothing goes to our servers. Saved results stay in this browser only.

• The Option Pool Shuffle, with the $8M pre-money, 6M share, 20% pool example (Venture Hacks, 2007).
• Option pool: pre-money or post-money calculation and its effect on founder ownership (The Holloway Guide to Raising Venture Capital).
• Option pools guide: how an option pool affects dilution (Carta).