Definition
The reduction in ownership percentage when additional shares are issued, especially painful in a down round where new shares are issued at a lower price. Watching your equity stake shrink while your company's value simultaneously decreases.
Example Usage
The down round came with massive down dilution—founders went from owning 40% to 15% while the company's valuation halved.
Origin
Financial terminology combining 'down round' and 'dilution'
Fun Fact
Down dilution often triggers anti-dilution provisions for preferred shareholders, meaning founders and common stockholders eat most of the dilution while investors are partially protected.
Source: Venture capital and equity financing terminology
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