Dilution determines the percentage of the company that founders give up to new investors. It is calculated by dividing the invested capital by the final post-money valuation:
Percentage given to the investor (%) = (Invested Capital / Post-money Valuation) x 100
For example, if you raise an investment of €500,000 on a pre-money valuation of €2,000,000 (post-money of €2,500,000), the new investors will obtain exactly 20% of the company’s shares.
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