ESOP (Employee Share Ownership Plan) Dilution Excel Model
  • ESOP (Employee Share Ownership Plan) Dilution Excel Model
  • ESOP (Employee Share Ownership Plan) Dilution Excel Model
  • ESOP (Employee Share Ownership Plan) Dilution Excel Model
  • ESOP (Employee Share Ownership Plan) Dilution Excel Model
  • ESOP (Employee Share Ownership Plan) Dilution Excel Model
  • ESOP (Employee Share Ownership Plan) Dilution Excel Model
Originally published: 27/11/2017 18:05
Publication number: ELQ-41731-1
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ESOP (Employee Share Ownership Plan) Dilution Excel Model

How startup dilution works for founders with ESOPs and investment.


In the startup world, we all need to learn at some stage how to make money. It's not as simple as creating a business, make some money, sell it on and start your life as a millionaire.

Many begin by owning the entire company, and if you don't give shares to your employees you'll always own the entire business. This is quite common for modern tech startups because as you go along and grow, others get a share of your company. Other people receiving a cut is known as dilution. I'm going to talk here about the effect of ESOPs, so you'll learn how your employees can make money as well.

Dilution is when the ownership stake in your company that belongs to you is less than before because you have shared ownership with another person. When other people are owners of a share, they get a cut of the money if the company is sold. Each time there is a dilutive event, the people who were on the cap table previously will be diluted equally except if they have some sort of exclusionary rights.

The sooner a person becomes part of or invests in the business, the more they will be diluted because they'll go through dilution at each event. This signifies that as the owner, you along with the other primary owners, are going to suffer the most dilution.

This business tool includes
1 ESOP model in excel, 1 Explanatory PDF, 1 Video guide

Steven Dewhurst offers you this business tool for free!

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  • Samid Rijek(last updated: 29/11/2017 13:09)
    Great Tool
    Great excel tool with helpful video!
  • Taku Khan(last updated: 29/11/2017 13:07)
  • Bejal Joshi(last updated: 29/11/2017 12:55)
    This really saved me a lot of time, great model and easy to use! Would recommend.


Discussion feed for ESOP (Employee Share Ownership Plan) Dilution Excel Model

The user community and author are here to help. Go ahead!

  • Bejal Joshi
    Ah okay this is more clear now!! Thanks Steve I appreciate it. Great tool btw!
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    • Steven Dewhurst
      Hi Taku, Bejal,
      Thanks for your comments! I get that this can be a little confusing. When the 10% option pool is set up, it has to be 10% after an investment, so before the investment it is 12.5%. This means that each person is diluted 12.5%!
      Hope this helps.
      arrow_drop_uparrow_drop_downReply reply
      • Taku Khan
        I'm not going to lie, it also took me a while to get my head around this. There's quite a good explanation at the bottom of page 3 if that helps?
        arrow_drop_uparrow_drop_downReply reply
        • Bejal Joshi
          Guys I really recommend watching the video that goes with this. Explanatory article and video both said in plain english making a complex thing not so complex! However still a little confused on one thing; maybe someone can help? Why- as a founder- would I be diluted 12.5% as opposed to 10% after ESOP #1?
          arrow_drop_uparrow_drop_downReply reply
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