Round-by-Round Equity Dilution: Seed to Series B — Calculation Examples and Control Defense

#The Core Formula — Shares Held ÷ Total Post-Investment Shares

A founder's post-investment ownership comes down to one formula: post-investment ownership = shares held ÷ total post-investment shares. Issuing new shares doesn't change how many shares the founder holds — the denominator grows while the numerator stays fixed, so the percentage drops.

New shares issued per round = existing total shares × dilution percentage ÷ (1 − dilution percentage). To sell 15% at seed: 10,000,000 × 0.15 ÷ 0.85 = 1,764,706 new shares. The founder's 10,000,000 shares remain unchanged before and after each issuance.

#Cumulative Dilution Across Rounds — Multiply, Don't Add

Dilution compounds like interest as rounds stack up. After seed the founder holds 85%; selling 20% at Series A brings that to 85% × 80% = 68%. Selling another 15% at Series B takes it to 68% × 85% = 57.8%. That's why the simple sum of the three round percentages (50%) doesn't equal the actual ownership lost (42.2%).

If a Pre-IPO round follows Series B, founder ownership dropping into the 30% range is not unusual. Because each round's negotiated percentage has an outsized impact on the final stake, founders should work backward from an IPO scenario before receiving the first term sheet.

#Option Pool Timing — Pre-Money or Post-Money

Setting up an option pool (ESOP) before investment concentrates the dilution burden on the founder; setting it up after investment spreads dilution across all shareholders. When an investor proposes a 'pre-money 10% option pool,' the founder is effectively carving out shares for the pool before the investment comes in.

These figures assume a founder holding 10 million shares, a $10M pre-money valuation, and a $5M VC investment. Under identical terms, option pool timing alone can swing founder ownership by roughly 6 percentage points. Korean term sheets often don't include the US-style pre-money option pool clause, so if one appears, always check whether there's room to negotiate.

#Anti-Dilution Provisions — Full Ratchet vs. Weighted Average in Practice

An anti-dilution provision adjusts an existing investor's conversion price when a subsequent round prices below the prior round (a down round). The adjustment method makes a big difference in how much additional dilution the founder absorbs.

The 2026 revised Korea Venture Investment standard term sheet, published by the Ministry of SMEs and Startups and the Korea Venture Investment Corporation, adopted the weighted average method for conversion price adjustments. Saying 'weighted average' alone isn't enough — the contract must explicitly state whether it is broad- or narrow-based. The 2026 revision also replaced RCPS (redeemable convertible preferred stock) with CPS (convertible preferred stock) as the primary instrument and relaxed the mandatory IPO clause.

#Protecting Control — Minimum Ownership Design and Multiple-Vote Shares

Even when ownership falls below 50%, there are tools to retain control. Since November 15, 2023, founder-shareholders of unlisted Korean venture companies have been able to issue multiple-vote shares with up to 10 votes per share. A founder with 30%-range ownership who applies a 10x multiple-vote structure can still hold majority voting power.

As of April 2026, only two companies — Colosseum Corporation and Hylium Industries — have actually adopted multiple-vote shares. The requirements are considered burdensome, including a mandatory conversion to ordinary shares within three years of listing, so legal review is essential before moving forward. Independently of multiple-vote shares, specifying management nomination rights, veto rights, and co-sale conditions in a shareholder agreement (SHA) is also a key control-protection tool. The 2026 revised standard contract separated the investment agreement (SPA) from the shareholder agreement (SHA) and streamlined contract types from 32 to 5.

#Pre-VC-Meeting Founder Dilution Checklist

1. Have you listed every founder, co-founder, and early employee share count and ownership percentage in the current cap table?
2. Have you back-calculated the percentage you plan to sell in the target round and your projected post-round ownership?
3. Have you decided your negotiating position on whether to set the option pool pre- or post-money?
4. Have you confirmed whether the investment agreement's anti-dilution clause is full ratchet or weighted average (broad- or narrow-based)?
5. Have you modeled how much additional dilution the founder would absorb in a down-round scenario?
6. Have you obtained legal review on whether you currently meet the multiple-vote share eligibility requirements (original incorporator, holding ≥30%, etc.)?