Glossary

Glossary

Dilution

The reduction in a founder's ownership percentage when new shares are issued to investors.

Dilution occurs when a company issues new shares — typically to investors in a funding round — reducing existing shareholders' proportional ownership. Founders should model dilution before accepting term sheets to understand how much equity they retain after each round and how option pools affect ownership. Understanding dilution early helps founders negotiate better terms and maintain alignment with investors over multiple rounds.

See also