How this calculation works
A reserved option pool can dilute existing holders before new investment shares are issued. A target pool expressed as a percentage after financing is therefore not the same percentage of the pre-financing share count. This page solves that sequence for one simple priced round with no existing pool. It shows existing holders, the newly reserved pool and the new investor on one fully diluted cap table.
Pre round pool fraction q = post money pool target × (pre money + investment)/pre money; pre round shares = existing/(1−q)A worked example
With one thousand existing shares, pre-money value four thousand and investment one thousand, the investor receives twenty percent post-money. A ten-percent post-money pool requires about 142.857 reserved pre-money shares. The resulting fully diluted ownership is seventy percent existing holders, ten percent pool and twenty percent investor. Reserving merely ten percent of the old one thousand shares would not reach the stated final pool target.
Good to know
No existing options, SAFEs, notes, warrants, secondary sales or multiple share classes are modeled. Actual term sheets can define pre-money capitalization and pool treatment differently. This is an entered dilution scenario, not a legal interpretation or valuation recommendation. Confirm the applicable capitalization definitions before comparing the arithmetic with financing documents.
Reference: Y Combinator — priced equity rounds and pool sequence (opens in a new tab) ↗
What this calculation answers
A reserved option pool can dilute existing holders before new investment shares are issued. A target pool expressed as a percentage after financing is therefore not the same percentage of the pre-financing share count.
This page solves that sequence for one simple priced round with no existing pool. It shows existing holders, the newly reserved pool and the new investor on one fully diluted cap table.
The Rights issue TERP subscription and dilution calculator examines a pro-rata subscription ratio. A pre-money reserved pool changes a different part of the ownership denominator and follows a different issuance sequence.
Use the right input conventions
Existing shares exclude any pool because this model starts without one. Pre-money valuation includes the new pool, and the entered pool target is its percentage of final post-money fully diluted shares.
Share quantities are theoretical fractional values. The model does not round authorized shares, exercise options or infer which promises, warrants or convertibles belong in a legal capitalization definition.
Interpret the result
The new investor’s fraction is investment divided by post-money value in this simplified round. Creating the pool pre-money leaves that investor fraction unchanged while reducing the existing holders’ share of the remainder.
Some pool targets cannot be reached with a finite pre-money pool for an extreme investment ratio. The page rejects that condition rather than reporting negative existing ownership or an infinite share reserve.
Work through the example
With one thousand existing shares, pre-money value four thousand and investment one thousand, the investor receives twenty percent post-money. A ten-percent post-money pool requires about 142.857 reserved pre-money shares.
The resulting fully diluted ownership is seventy percent existing holders, ten percent pool and twenty percent investor. Reserving merely ten percent of the old one thousand shares would not reach the stated final pool target.
Where the model stops
No existing options, SAFEs, notes, warrants, secondary sales or multiple share classes are modeled. Actual term sheets can define pre-money capitalization and pool treatment differently.
This is an entered dilution scenario, not a legal interpretation or valuation recommendation. Confirm the applicable capitalization definitions before comparing the arithmetic with financing documents.
A few questions, answered
Why does a post money ten-percent pool require more than ten percent of old shares?
The reserve itself and the new investor shares enlarge the final denominator.
What changes in the comparison?
Increase the final pool target and inspect how dilution falls on the existing holders.