Historical and Projected Dilution Analysis

Historical and projected dilution analysis refers to the evaluation of how a startup’s ownership structure has changed over time and how it is expected to evolve in future funding rounds. This analysis is crucial for founders and investors to understand equity dilution and its impact on ownership percentages.

Historical Dilution Analysis
This examines past funding rounds and how they have affected shareholder ownership. Key factors include:

  • Initial Ownership Structure – Founders’ equity before external investments.
  • Impact of Funding Rounds – How each round (Seed, Series A, B, etc.) diluted existing shareholders.
  • Stock Option Issuance – Employee stock options and their effect on ownership.
  • Convertible Securities – SAFE notes or convertible debt that later converted into equity.
  • Investor Influence – Changes in voting power and control over time.

Projected Dilution Analysis
This forecasts how future investments will impact ownership. Key considerations include:

  • Future Funding Needs – Estimating capital requirements and potential dilution.
  • Valuation Trends – Predicting how startup valuation will affect dilution rates.
  • Equity Allocation Strategies – Planning stock option pools and founder equity retention.
  • Exit Scenarios – Assessing dilution impact in an IPO or acquisition.

Understanding dilution is essential for maintaining control and maximizing value.

Written by Swedish Ventures, Rolf Olsson. Remarks to this article could be sent to glossary@swedishventures.se

ASO: DD-01-13

ASO IDDD-01-13