Dilution
Dilution is the reduction in an existing shareholder's ownership proportion or claim per share caused by issuing additional shares.
Tech Startup Toolkit
Dilution is the reduction in existing owners' percentage ownership caused by issuing new shares.
- How it is used
- Frames financing and employee-option discussions around ownership percentage versus the value created by new capital.
- How deep it goes
- Explains share issuance, ownership math, valuation effects, flat rounds, and a worked share-count scenario without detailed financial modeling.
- Examples
- Uses founder ownership after seed financing, common ownership falling from 60% to 36%, and a 1,000-share holder facing new issuance.
- What you can do after
- Evaluate/understand whether a financing’s valuation increase may offset the reduction in percentage ownership.
Investing for Programmers
Dilution is the reduction in an existing shareholder's ownership proportion or claim per share caused by the issuance of additional shares.
- How it is used
- Evaluates how equity funding and stock-based compensation change existing ownership in companies and start-ups.
- How deep it goes
- Defines dilution, works through a seed-round calculation, and models multiple rounds in Python without detailed valuation mechanics.
- Examples
- Uses a founders’ seed round, successive Series rounds, and a Facebook ownership example.
- What you can do after
- Apply it via Python and pandas to model founder ownership across funding rounds.
Related concepts
- financing roundproduced by · A financing round is a discrete fundraising event in which a company raises capital from one or more investors under specified terms.
- stockproduced by · Stock is a financial security representing an ownership interest in a company, often divided into shares that may confer economic or governance rights.
- new shareproduced by · A new share is an additional unit of a company's equity created and issued to an investor.
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