Understanding equity dilution is crucial for any startup or business seeking external investment. The Equity Dilution Calculator helps you estimate the impact of new investments on existing shareholders.
Equity Dilution Calculation Formula
The following formula is used to calculate equity dilution:
Dilution Percentage = (New Shares / (Existing Shares + New Shares)) * 100
Variables:
- Dilution Percentage is the percentage reduction in ownership
- New Shares are the shares issued to new investors
- Existing Shares are the shares held by current shareholders
To calculate the dilution percentage, divide the number of new shares by the total number of shares (existing plus new) and multiply by 100.
What is Equity Dilution?
Equity dilution occurs when a company issues additional shares, reducing the ownership percentage of existing shareholders. This is a common practice during fundraising rounds