Fundraising
Dilution
Dilution is the reduction in existing shareholders' ownership percentage when a company issues new shares. Dilution occurs on each funding round and when options are granted, and reduces percentage ownership without necessarily reducing the value of the holding.
In plain terms: Your slice gets smaller each time new shares are issued.
Why it matters
A smaller percentage of a more valuable company can be worth considerably more. The failure mode is not dilution itself but unmodelled dilution — particularly from stacked SAFEs converting simultaneously alongside an option pool expansion.
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