How dilution actually stacks across rounds.
Founder dilution at any single round looks manageable — 18% pre-seed, 20% seed, 22% Series A. But these are multiplicative, and the option pool refresh at each round adds 10-15% more on top. By Series B, typical founder ownership is 35-45% of the original cap table. The math is mechanical; founders consistently underestimate it.
Worked example: solo founder to Series B
Solo founder starts with 100% of the company at incorporation.
- Option pool 12% → Founder 88%
- Investor takes 9.1% on $500K at $5.5M post → Founder 80%
- Option pool refresh to 12% post → Founder 80% × ~0.93 = 74%
- Investor takes 16.7% on $3M at $18M post → Founder 74% × 0.833 = 62%
- Option pool refresh → Founder 62% × ~0.93 = 58%
- Investor takes 16.7% on $8M at $48M post → Founder 58% × 0.833 = 48%
- Option pool refresh → Founder 48% × ~0.96 = 46%
- Investor takes 11.8% on $20M at $170M post → Founder 46% × 0.882 = 41%
Solo founder ends Series B at 41% ownership. The math here is for a single founder; co-founder teams start at smaller percentages and end correspondingly lower. A two-founder team with a 50/50 split at incorporation ends Series B at roughly 20.5% each.
The option pool is the silent dilution
Every funding round refreshes the option pool. The refresh comes out of pre-money allocation, not post-money — which means it dilutes founders, not the new investor. A 12% option pool refresh on a $15M pre-money is essentially $1.8M of founder dilution that doesn't fund any business operation. Most founders don't internalise this until Series A when they see the cap table.
What founders can negotiate
- Option pool sizing. If the VC wants a 15% post-money pool refresh, push for 10-12%. Document the hiring plan that justifies the smaller pool.
- Pool source (pre vs post). The default is pre-money pool refresh (dilutes founders). Negotiate for a portion to come post-money (dilutes the new investor too). This is rare but achievable when the round is competitive.
- Pre-money valuation itself. Higher pre-money = lower founder dilution per dollar raised. The dilution percentages above scale linearly with the inverse of pre-money.
- Round size. Smaller round = less dilution but more frequent fundraising. Balance against the operating runway you actually need.
Practical recommendation: Build a cap-table spreadsheet that projects 4 rounds out before you start fundraising. Knowing your projected Series B ownership when you sign the Pre-seed term sheet changes how you negotiate option pools and pre-money. Founders who only model the current round routinely arrive at Series B owning less than they expected.