ESOP dilution calculator.
See exactly how a new funding round + ESOP pool top-up dilutes founders, existing investors, and the new investor. Toggle pre vs post-money pool.
Your inputs
Company valuation before the new round.
Total new capital being raised.
Pool already on the cap table, pre-round.
Desired pool after the round closes.
Combined founder stake before the round.
Combined existing investor stake.
Pre-money dilutes founders + existing only. Post-money dilutes new investor too.
Founders go from 80.0% to 58.7% after the round and pool top-up.
| Post-money valuation | ₹60 Cr |
| New investor stake | 16.7% |
| ESOP top-up created | 10.0% |
| Pool source | Pre-money |
The math behind your dilution.
Every priced funding round in India does two things at once: it brings in a new investor who takes a slice of the post-money cap, and it usually requires an ESOP pool top-up so the company has options to grant employees over the next 18–24 months. The combination is what really hits founder ownership.
Post-money valuation is the simplest piece — post_money = pre_money + round_size — and the new investor's ownership is investor_pct = round_size / post_money. For a ₹50 Cr pre-money + ₹10 Cr round, the investor gets 16.7%.
Pre-money pool (Indian VC default): the pool top-up sits in the pre-money cap, so only founders + existing investors fund it. After the round, the ESOP pool ends at the target percentage of post-money fully-diluted, but the cost of creating it is borne entirely by people who were on the cap table before the investor showed up. This is the case that hurts founders the most.
Post-money pool: the pool top-up dilutes everyone, including the new investor, proportionally. Founders prefer this. Term sheets rarely offer it.
When to use this calculator. Run it before you sign a term sheet. Run it again before each subsequent round to model cumulative dilution. CFOs use it to brief boards on the founder-ownership impact of competing offers. LPs use it to estimate post-deal founder alignment.
Indian context. ESOP issuance is governed by Section 62(1)(b) of the Companies Act 2013 and Rule 12 of the Companies (Share Capital and Debentures) Rules 2014. SEBI's SBEB&SE Regulations 2021 cover listed companies. For DPIIT-recognised startups, perquisite tax on exercise can be deferred up to 5 years under Section 80-IAC of the Income Tax Act.
Caveats. This is a simplified single-class share model. Real cap tables have liquidation preferences, anti-dilution adjustments (broad-based weighted average is standard in India), convertible notes, SAFE-equivalents, and vesting. Use this for direction, not for final term sheet negotiation.
Questions founders ask.
What is ESOP dilution?+
ESOP dilution is the reduction in existing shareholders' ownership percentage when a company creates or expands an Employee Stock Option Pool. New options are issued from authorized share capital, increasing the total share count and reducing the percentage held by founders and existing investors.
What is the difference between a pre-money and post-money ESOP pool?+
A pre-money ESOP pool is created before the new investor invests, so only founders and existing shareholders are diluted by the pool top-up. A post-money pool is created after the investment, so the new investor is also diluted proportionally. Term sheets in India almost always require a pre-money pool, which is heavier on founders.
What is a typical ESOP pool size for an Indian startup?+
Pre-Series A pools are typically 8–12% of post-money cap. Series A often tops up to 10–15%. Late-stage companies may sit at 5–8%. Karnataka- and Bengaluru-based VCs commonly require a 10% post-Series A pool.
How is post-money valuation calculated?+
Post-money valuation equals pre-money valuation plus the round size (new investment). For example, a pre-money of ₹50 Cr with a ₹10 Cr round results in a post-money valuation of ₹60 Cr, and the new investor owns 10/60 = 16.7%.
Why does my dilution differ from the headline percentage?+
Headline dilution often ignores the ESOP top-up. If you raise 16.7% to a new investor but also create a 5% pre-money ESOP top-up, founders absorb both the new investor's stake and the pool top-up — so total founder dilution is well above 16.7%.
Are ESOP allocations taxable in India?+
Grants are not taxable. Exercise triggers perquisite tax on the difference between fair market value and exercise price. Sale of underlying shares triggers capital gains. DPIIT-recognised startups can defer perquisite tax for up to 5 years under Section 80-IAC.
What's the difference between ESOP and sweat equity?+
ESOP is a stock option granted to employees with a vesting schedule and exercise price. Sweat equity is shares issued to founders or employees in consideration for non-cash contributions like IP or know-how, governed by Section 54 of the Companies Act 2013.
Want this built into your cap table?
Kapitalyze runs your real cap table — every share class, ESOP grant, convertible, and waterfall — with full version history and SS-1/SS-2 compliant board outputs.