Fundraising
Do You Understand Dilution?
Dilution is the reduction in equity as new shares are issued. In simple terms: the more of the company you sell, the less of it you own. Getting too diluted too early is one of the most damaging mistakes a founder can make.
Common shares vs preferred shares
| Share type | Who gets them |
|---|---|
| Common shares | Founders, employees, advisors |
| Preferred shares | Investors |
Preferred shares give investors preferential treatment — they get their money out first, before founders or employees. Preferred shares also typically come with information rights, board rights, and other protections.
Pre-money vs post-money valuations
Pre-money is the valuation of the company before the new capital has been added.
Post-money is the valuation after the new capital has been added.
Example: Company A raises $100M at a $900M valuation.
- Pre-money valuation: $900M
- Post-money valuation: $1B
The investors own $100M / $1B = 10% of the company post-raise.
How much dilution is typical? Real benchmarks from SAFE rounds
Carta analysed 12,690 post-money SAFEs signed by US startups between January and September 2025. The table below shows the percentage of the company sold at each round size, across the 25th, 50th (median), and 75th percentiles.
| Round | Amount Raised | 25th percentile | Median | 75th percentile |
|---|---|---|---|---|
| Angel Round | Under $250K | 0.9% | 2.5% | 8.2% |
| Big Angel Round | $250K–$499K | 3.7% | 7.0% | 14.2% |
| Small Pre-Seed | $500K–$999K | 6.2% | 10.7% | 18.2% |
| Pre-Seed | $1M–$1.9M | 10.0% | 15.6% | 21.8% |
| Small Seed | $2M–$2.9M | 11.5% | 18.4% | 27.8% |
| Standard Seed | $3M–$3.9M | 12.9% | 20.0% | 28.9% |
| Standard Seed | $4M–$4.9M | 16.2% | 21.6% | 26.9% |
| Bigger Seed | $5M–$5.9M | 19.2% | 23.7% | 33.3% |
A few things to note:
- The YC standard deal — $500K for 7% equity — sits exactly at the median dilution for a Big Angel Round ($250K–$499K). It's a well-calibrated benchmark.
- The spread widens at larger rounds. At Small Pre-Seed and above, the difference between the 25th and 75th percentile is often 10–12 percentage points. Negotiation and valuation matter significantly at these stages.
- Founders who give away 20%+ at pre-seed have less room to manoeuvre. By the time you reach a Seed or Series A, the cumulative dilution can leave founders with a surprisingly small stake. Model it out before you agree to terms.
Source: Carta, Jan–Sept 2025.
Cap table software
There is plenty of cap table software available — Carta is the most widely used. Use it from day one so your cap table is always accurate and ready for diligence.