What is dilution math?
Dilution math is the calculation that quantifies how a new equity issuance reduces the ownership percentage of existing shareholders. Every venture funding round dilutes founders, employees, and prior investors as new shares are issued to incoming investors. Understanding the pre-money/post-money relationship, option pool expansion timing, and the impact of convertible instruments is essential for both founders defending equity and investors structuring optimal terms.
Core formulas
- Post-money valuation = Pre-money valuation + Investment amount
- New investor ownership % = Investment / Post-money valuation
- Founder dilution % = Investment / Post-money (in the simplest no-pool case)
- Price per share (PPS) = Pre-money / Fully diluted pre-money share count
- New shares issued = Investment / PPS
Pre-money vs. post-money option pool
- Pre-money pool (“shuffle”): option pool top-up included in pre-money — dilutes founders only. Investor-favourable; common in US.
- Post-money pool: option pool created post-financing — dilutes everyone proportionally. Founder-favourable; harder to negotiate.
- Effective valuation: with a 10% pre-money pool top-up on a $10M pre-money/$10M raise deal, founders’ effective pre-money is closer to $9M than $10M.
Convertible instruments and SAFE conversion
- SAFE/note conversion at qualified financing: uses valuation cap or discount to determine conversion price; converts before priced round shares are issued.
- Stacking dilution: multiple SAFEs at different caps all converting at the same financing compound dilution unexpectedly.
- YC pro-rata side letter: some SAFEs include MFN or pro-rata rights affecting downstream dilution.
Türk girişim ekosisteminde uygulama
Türk startup’larında NVCA model belgeleri ve YC SAFE yaygın benimsenmiştir; ancak Türk Anonim Şirket yapısında esas sermaye değişiklikleri Genel Kurul kararı ve MERSİS tescili gerektirir — pratik olarak Cayman/Delaware holding üzerinden yapılır. SPK Madde 12 düzenlemeleri halka açık Türk şirket pay sermaye artışlarında orantılı pay sahibi rüçhan hakkını korur (yatırımcı dilution’unu yumuşatır). Türk seri A turlarında pre-money pool top-up ABD pratiğine yakındır; founder müzakere edebilirse post-money pool tercih edilir.
Do: model fully-diluted cap table including all convertibles before signing term sheet; clearly disclose option pool placement (pre vs. post); use cap table software (Carta, Pulley) for accuracy.
Don’t: negotiate pre-money valuation without considering pool size and timing — a “higher pre-money with bigger pool” can equal a lower effective valuation.