Glossary · Equity and dilution · Updated 28 August 2026
Dilution is the fall in an existing shareholder's percentage when a company issues new shares. It does not reduce how many shares you own, only their relative weight: owning 20% of a €10M company beats owning 100% of a €1M one.
Dilution is calculated on a fully diluted basis, not on issued shares alone. An undistributed option pool already dilutes, because it sits in the denominator. That is why negotiating pool size is really negotiating founder dilution.
The magnitudes are fairly stable. On Carta data, median dilution for US software companies sat near 19–20% at seed through 2025, roughly 18% at Series A, 14% at Series B and 10% at Series C. European percentages are similar but the amounts raised for them are often smaller.
What matters is not a single round's dilution but the compounding. A founder giving up 20% at seed, 18% at Series A and 15% at Series B does not keep 47%: dilutions multiply. From 100%, they retain 0.80 × 0.82 × 0.85 — about 56% — before any further option pool.
Example: dilution on a seed round
Two founders own 100% of the company. They raise €1M at a €4M pre-money valuation.
| Pre-money valuation | €4,000,000 |
|---|---|
| Amount raised | €1,000,000 |
| Post-money valuation | €5,000,000 |
| Investor ownership | €1M / €5M = 20% |
| Shares before the round | 800,000 (founders, 100%) |
| New shares issued | 200,000 |
| Total after the round | 1,000,000 shares |
| Founder ownership | 800,000 / 1,000,000 = 80% |
| Price per share | €1,000,000 / 200,000 = €5.00 |
The founders still hold 800,000 shares — that number never moved. What changed is that those shares are now worth €5.00 each rather than a notional zero: €4M for 80% of the company.
The common mistake
Thinking in percentages rather than value. Refusing a round to avoid 20% dilution only makes sense if the company reaches the same milestones without the money. Usually the dilution avoided costs more than the dilution accepted.
Frequently asked questions
How much dilution should you accept at seed?+
The usual band is 15% to 25% for a seed. Carta's medians put seed dilution around 19–20% for US software companies in 2025. Above 30% in a single round, later investors start worrying about how motivated the founders still are.
How do you limit dilution?+
Raise less more often as valuation rises, negotiate the option pool to be created post-money rather than pre-money, and avoid stacking low-cap convertibles whose combined effect only appears at conversion.
Sources
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