Dilution
Definition
The reduction in existing shareholders' ownership percentage when a company issues new shares, typically during a fundraising round. Dilution is an expected part of growth financing, but founders and early investors monitor it closely to protect their economic interest.
Related Terms
Related FAQ
A pro-rata (or pro-rata participation) right entitles an investor to maintain their ownership percentage by participating in future funding rounds on the same terms as new investors.
Read full answer →Pre-money valuation is the implied value of a company before new investment. It determines how much equity an investor receives for their cheque.
Read full answer →What is the Cap Table and why does it matter?
A cap table (capitalisation table) lists all of a company's shares, options, and convertible securities, showing who owns what percentage of the company — it is essential for fundraising, dilution analysis, and exit planning.
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