Dilution

The reduction in a shareholder's ownership percentage when the company issues new shares. Plain-language explainer with examples. Free to read.

Dilution

The reduction in a shareholder's ownership percentage when the company issues new shares.

What Dilution means

Every time a startup raises capital, it issues new shares, and existing shareholders' percentages shrink. Typical dilution is 15–25% per priced round. A founder who starts with 100% often ends up with 15–25% at exit after seed, Series A, B, C, and employee option pools.

Dilution is not inherently bad — a smaller slice of a much bigger pie is what fundraising is for. What matters is whether the capital raised generated enough enterprise value to justify the shares given up.

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•By Alejandro Cremades