Dollars and percent

Do you want 100% of a company with a value of $2M, or 10% of a company with a value of $200M? The first answer sounds better, because 100% is the full company. But 10% of $200M is $20M, ten times more money. Founders accept dilution in each round for this reason. This lesson shows why a smaller percentage can be worth more, and when it is not.

Percent and dollars are two different numbers

Your percentage tells you how much of the company you own. The dollar value tells you what that part is worth at the price of the last round. You get the dollar value with one multiplication:

Value = Your percentage × Post-money
$2M   = 100%            × $2M
$20M  = 10%             × $200M

You get the same number from your shares and the price per share. If you own 1,000,000 shares and the last round paid $20 a share, your shares are worth $20M. The price per share lesson shows where that price comes from.

This value is a paper value. Nobody paid you $20M. The number tells you what investors paid for each share in the last round. Your shares become cash only when you sell them, for example when a buyer purchases the company. The lesson pre-money and post-money explains why a valuation is not money in the bank.

What one round does to your stake

In this lesson, Ada and Ben own all 10,000,000 shares of Northwind, and no round adds an option pool. Real companies are more complex, and the next modules add pools and SAFEs. The simple version shows the idea clearly.

Northwind’s seed round raises $4M at a $20M post-money valuation, so the pre-money valuation is $16M. Before the round, the founders own 100% of a company with a value of $16M. After the round, they own 80% of a company with a value of $20M:

Before: 100% × $16M pre-money  = $16M
After:  80%  × $20M post-money = $16M

The founders’ shares have the same value before and after the round. The reason is simple. The investors paid $4M for 20% of a company that holds their own $4M. The new money pays for its own shares, and it takes nothing from the founders. As a formula:

Value after = % before × Pre-money

The rule has one important exception. If the pre-money valuation includes a new option pool, part of the pre-money valuation pays for the pool, and the founders get less. Then your value after the round is your percentage before × the effective pre-money valuation. The lesson the option pool shuffle shows this calculation.

Dilution multiplies

Predict first

Northwind raises three rounds, and each round sells 20% of the company. What part of Northwind do Ada and Ben own after the third round?

Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.

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Each round multiplies your percentage by (1 − the part that the round sells). This rule applies to all holders before the round, not only to the founders:

Seed:     100% × (1 − 20%) = 80%
Series A: 80%  × (1 − 20%) = 64%
Series B: 64%  × (1 − 20%) = 51.2%

The lesson dilution across rounds adds option pools and SAFEs to this chain.

Where the value comes from

Between its rounds, Northwind becomes a better company, and each new investor pays more for each share. The seed raises $4M at a $20M post-money valuation, the Series A raises $15M at $75M, and the Series B raises $25M at $125M. The table puts the percentage and the value side by side:

Moment	Founders own	Share price	Their value
Before the seed	100%	$1.60	$16M
After the seed	80%	$1.60	$16M
After the Series A	64%	$4.80	$48M
After the Series B	51.2%	$6.40	$64M

The founders’ percentage decreases at every round. Their dollars stay flat at the seed. Then they become three times larger at the Series A and one third larger at the Series B. The cause of each increase is the price per share, which goes from $1.60 to $4.80 to $6.40. Founders accept dilution because they think that the money helps the company get to a higher price.

Try it

Your percentage against your dollars

Ada and Ben own all 10,000,000 shares of Northwind. Change each round, and compare what they own with what their shares are worth.

Round to change

SeedSeries ASeries B

Amount raised

$4M

Post-money valuation

$20M

Sells 20% at $1.60 a share.

What the founders own

Before the seed

100%

After the seed

80%

After the Series A

64%

After the Series B

51.2%

What the founders’ shares are worth

Before the seed

$16M

After the seed

$16M

After the Series A

$48M

After the Series B

$64M

After 3 rounds, the founders own 51.2%, down from 100%. The last round priced each of their 10,000,000 shares at $6.40, so the shares are worth $64M, against $16M before the seed.

A round does not change the value of the founders’ shares on the day of the round. The value increases between rounds, when the next investors agree to pay a higher price for each share.

Select the Series B and move its post-money valuation to $50M. The founders now own 32%, and their shares are worth $16M, a third of the value after the Series A. Then put the Series B back at $125M and move the Series A valuation. The value at the end follows the last price per share.

When dilution costs you money

Dilution is a good trade only if the next price is higher. The price per share sets the result:

• In an up round, the price per share is higher than in the last round. You own less, but your shares are worth more.
• In a flat round, the price is the same. You own less, and your shares are worth no more.
• In a down round, the price is lower. You own less, and your shares are worth less.

A down round costs the founders in two ways. At a lower price, the same money buys more new shares, so the dilution is larger. Each share from before the round also has a lower value. In the widget example, a $25M Series B at a $50M post-money valuation sells 50% of the company. It cuts the founders’ value from $48M to $16M. The lesson down rounds and recaps shows the extra terms that make a down round worse.

A paper value can also be much more than the cash that holders get in a sale. In its Q3 2026 Venture Monitor, PitchBook reported one sale and one agreed sale of well-known software companies. The two prices were almost 90% less than the last private valuations of the companies. In a sale at a low price, the investors with preferred stock usually get their money first. Thus the holders of common stock, which includes the founders, can get less than their percentage of the sale price. The lesson liquidation preferences shows how.

A worked example

Worked example · step 1 of 5

The founders of Kestrel Health through the Series A

1. 1

   Start from the cap table

   The founders of Kestrel hold 6,000,000 of 10,000,000 fully diluted shares. The seed price was $1.00 a share.

   Founders before the Series A = 6,000,000 ÷ 10,000,000 = 60%
   Value at the seed price      = 6,000,000 × $1.00     = $6M

Show step 2Show all steps

Now do the steps yourself.

Work it out

Maya owns 30% of a company with a $10M post-money valuation. After the next round, she owns 24% of a company with a $50M post-money valuation. What is her stake worth now?

Your answerCheck

Work it out

Before a round, the founders own 50% of a company. The round raises $10M at a $30M pre-money valuation, with no new pool. What are the founders' shares worth just after the round?

Your answerCheck

Work it out

The founders hold 4,000,000 shares. The seed price was $2.00 a share, and the Series A price is $1.50 a share. By how much did the value of the founders' shares decrease?

Your answerCheck

What real founders own

The two median priced rounds alone leave 80.6% × 81.3% = 65.5% of the company with the holders from before the seed. The median founding team owns much less, approximately 36% after the Series A. Most of the difference comes from SAFEs before the seed, option pools, bridge rounds, and cofounders who leave. The two numbers also come from different groups of companies, so the comparison is only approximate. The SAFEs module shows how SAFEs add to the dilution before the first priced round. The last lesson of this module, how valuations are set, shows what sets the price that makes the trade worth it.

Quiz · question 1 of 6

Test what you learned

Which stake is worth more: 100% of a company with a value of $2M, or 10% of a company with a value of $200M?

• A100% of $2M, because you own the full company
• BYou cannot compare a percentage with a value
• C10% of $200M, by ten times
• DThe two stakes are worth the same