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    Valuation & Cap Table
    Entry
    Global · Global

    Dilution

    Also called: Equity dilution

    TL;DR

    The reduction in an existing shareholder's ownership percentage caused by issuing new shares in a financing or an option grant.

    Dilution is the inevitable consequence of issuing new equity. Every priced round dilutes existing shareholders proportionally to the new shares created. A $10M raise at a $40M post-money dilutes existing shareholders by 25%. Option pool top-ups, anti-dilution adjustments, and SAFE conversions all add to cumulative dilution.

    Founders should model cumulative dilution from pre-seed through Series C to understand realistic ownership at exit. Typical founder ownership at IPO ranges from 10 to 25%, depending on capital raised and round structure.

    Formula

    Dilution = New Shares ÷ (Existing Shares + New Shares)
    • New Shares , Shares issued in the new round
    • Existing Shares , Shares outstanding before the round (fully diluted)

    Worked example

    Founders own 100% of 8M shares pre-investment. Round issues 2M new preferred shares at $5 each ($10M raise, $50M post-money). Founder ownership drops from 100% to 8M ÷ 10M = 80%, that's 20% dilution.

    Common pitfalls

    • •Optimizing each round in isolation instead of modeling cumulative dilution to exit.
    • •Underestimating dilution from convertible instruments.
    • •Ignoring how anti-dilution provisions interact with future down rounds.

    When this shows up in a pitch deck

    Dilution math drives the cap-table model in the data room; deck content rarely names it directly.

    See Dilution in context

    Dilution shows up most often in these scoring rubrics and investor profiles, jump straight to who cares about it and how to pitch them.

    Related terms

    Pre-Money Valuation

    The agreed-upon value of the company immediately before a new investment round closes, pre-money + new money = post-money.

    Option Pool

    Equity reserved for future employee, advisor, and contractor grants, usually sized as 10 to 20% of fully diluted shares.

    Anti-Dilution (Weighted Average)

    A standard anti-dilution provision that adjusts a prior preferred holder's conversion price using a formula weighted by the size of the down round.

    Down Round

    A funding round priced at a lower valuation per share than the previous round, typically triggering anti-dilution adjustments and signaling stress.

    Fully Diluted Shares

    The total share count assuming every option, warrant, convertible note, SAFE, and reserved pool has been exercised or converted.

    Pitch deck pillar pages

    Long-form deep dives on the slides Dilution most often shows up on.

    Fundraising Readiness Checklist

    Are you ready to raise? A 12-question fundraising readiness checklist: deck quality, traction milestones, valuation defensibility, investor list, data room.

    Use Dilution in your next pitch deck

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