Dilution

Business Finance

Dilution is the reduction in existing shareholders' ownership percentage when a company issues new shares — typically from funding rounds, employee option exercises, or acquisitions. A founder owning 100% before raising at $20M pre-money with $5M investment ends with 80% ownership. Over multiple rounds, founder ownership shrinks: typical Series A founder ends with 30-50%; Series C with 15-25%. Dilution isn't necessarily bad — if the new capital grows the business, the smaller percentage of a larger pie can exceed the original 100% of a smaller pie. Anti-dilution provisions protect investors against down rounds; founders don't have equivalent protection.