Dilution across seed, Series A and Series B: where founder ownership actually goes

Founders start owning 100% of the company. Nobody ends there. The question is only whether what you gave up bought something worth more than it cost.

Here is the arithmetic, round by round.

The mechanic in one line

When new shares are issued, your share count does not change — the denominator grows. So each round multiplies what you had by (1 − the new issuance).

That compounding is why dilution surprises people. Three rounds at “only 20%” is not 40% remaining, and it is not 60% either.

The full sequence

Two founders, 10,000,000 shares, 100% of the company.

Seed: 20% to investors, 10% pool (created pre-money)

New investors take 20%, a fresh option pool takes 10%, and — because the pool is created pre-money, as in part 3 — the founders absorb both.

Founders: 100% → 70.0%

Series A: 20% to investors, 5% pool top-up

The round issues 25% of the post-round company. Everyone existing is multiplied by 0.75.

70.0% × 0.75 = 52.5%

Founders: 70.0% → 52.5%

Series B: 15% to investors, 3% pool top-up

18% issued; existing holders multiplied by 0.82.

52.5% × 0.82 = 43.05%

Founders: 52.5% → 43.05%

The whole journey

Stage	New shares issued	Founders’ combined stake
Incorporation	—	100.00%
Seed	30% (20% + 10% pool)	70.00%
Series A	25% (20% + 5% pool)	52.50%
Series B	18% (15% + 3% pool)	43.05%

Split 60/40, Founder A holds 25.83% and Founder B 17.22% after Series B.

Why the pool top-ups matter more than they look

Across three rounds the pools took 10%, 5% and 3% — and they are pure dilution with no cash attached. Investors at least wire money for their shares.

The pool buys something too: the team that makes the company worth anything. But it is worth seeing clearly that roughly 18% of the compounding dilution in this example came from pools, not from investors, and every one of those top-ups was negotiable on size.

The number that actually matters

Percentage is not the score. Value is.

Stage	Founders’ stake	Company value	Founders’ value
Incorporation	100.00%	$1,000,000	$1,000,000
Seed	70.00%	$10,000,000	$7,000,000
Series A	52.50%	$40,000,000	$21,000,000
Series B	43.05%	$150,000,000	$64,575,000

Ownership fell by more than half. Value rose sixty-fold. That is the trade venture funding exists to make — and it is why “I don’t want to be diluted” is the wrong instinct, while “what am I getting for this dilution” is the right one.

The version that goes wrong is raising at a valuation that does not grow into itself: dilution is permanent, valuation is not.

Four things that make it worse than the table

SAFEs you forgot to model. Converting SAFEs land before the priced round’s arithmetic and come out of the founders (part 6).

Pre-money pools. Each one shifts about two points to the investor at a 20% round, for the same money.

Anti-dilution after a down round. Existing preferred converts at a better ratio, diluting common further. Part 9 covers the arithmetic.

Bridge rounds. Cheap to agree, dilutive on terms set when you had the least leverage.

The habit

Model the next round before you close this one. A simple sheet with post-round percentages for founders, pool, existing investors and new investors, run at two or three plausible valuations, takes fifteen minutes.

The founders who arrive at Series B surprised by their ownership are, almost without exception, the ones who never ran it.

Next

Part 8: the exit waterfall. Owning 43.05% does not mean receiving 43.05% of the sale price — liquidation preferences get paid first, and the gap between those two numbers is where most founder disappointment lives.