Dilution

Dilution is the reduction in your ownership percentage that happens when the company issues new shares, usually to raise money or grant employee options. If you own a third of a company and it sells new shares, your slice shrinks even though the number of shares you hold is unchanged. The crucial point is that dilution isn't automatically bad: a smaller slice of a much larger pie can be worth far more in absolute terms. What matters is whether the cash you took in created more value than the ownership you gave up. For a lean founder, the discipline is to dilute on purpose and at a fair price, not by accident through stacked SAFEs, generous option pools, or rounds raised from weakness. Track your fully diluted ownership, the figure that assumes every option and convertible has converted, because that's the number that's actually true on the day someone writes a cheque to buy the company.