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Equity Formula:
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Startup equity calculation determines the percentage of ownership an investor receives in exchange for their investment, based on the company's pre-money valuation. This calculation is fundamental to fundraising and founder dilution management.
The calculator uses the equity formula:
Where:
Additional Calculations:
Details: Accurate equity calculation is crucial for fair fundraising, maintaining founder ownership, and ensuring proper company valuation. It helps both founders and investors understand the financial implications of investment rounds.
Tips: Enter investment amount in USD, pre-money valuation in USD. Both values must be positive numbers. The calculator will automatically compute equity percentage, post-money valuation, and founder dilution.
Q1: What is the difference between pre-money and post-money valuation?
A: Pre-money valuation is the company's value before investment, while post-money valuation includes the investment amount (Pre-Money + Investment).
Q2: How does equity dilution affect founders?
A: Each funding round reduces founder ownership percentage, but ideally increases the value of their remaining shares through company growth.
Q3: What is a typical equity percentage for seed rounds?
A: Seed rounds typically involve 10-25% equity dilution, depending on the investment amount and company valuation.
Q4: Should equity calculations include employee stock options?
A: Yes, employee stock option pools are typically created from founder shares and should be considered in overall equity planning.
Q5: How often should equity calculations be reviewed?
A: Equity should be reviewed before each funding round and when considering new hires with equity compensation.