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Dilution Ladder

Raise a pre-seed, a seed and a Series A. Each round offers three term sheets: clean terms, a higher valuation with an option pool top-up, a 2x liquidation preference or more money than you need. After Series A the company sells. Your score is the founders’ payout against the best possible path.

HardStartup3 minNew

How to play Dilution Ladder

Each round shows the cap table, what the stage needs and three term sheets. Pick one and press Sign. The cap table updates and the feedback says whether that choice keeps you on the best path.
After Series A the company sells for the stated exit value. Investors either take their liquidation preference or convert to shares, whichever pays them more. Your XP depends on how close the founders’ payout is to the best path.

Three things that dilute founders

  • New money. An investor who puts in $2M at an $8M pre-money valuation owns 20% after the round: $2M divided by the $10M post-money value.
  • Option pool top-ups. Investors often ask for the employee option pool to be enlarged before their money goes in. The new options come out of the existing holders, so the founders are diluted more than the headline valuation suggests. This is often called the option pool shuffle.
  • Raising more than you need. Extra cash buys runway, but it is paid for in equity at today’s price.

Liquidation preferences

A liquidation preference lets an investor take their money back first when the company is sold. With a 1x non-participating preference they take either their money back or their share of the sale, whichever is larger. A 2x preference doubles the first number, which can take a big slice of a modest exit even if the headline valuation looked better.

Comparing term sheets

Compare offers on what the founders keep at a realistic exit, not on the valuation alone. The startup guides cover fundraising and cap tables in depth. Try Runway Rush or the startup runway calculator.

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