Definition
The reduction in founders' ownership percentage that occurs each time the company raises money or issues new equity. It's the slow, inevitable erosion of ownership that founders signed up for when they took outside capital.
Example Usage
After three funding rounds, the founding team's stake had been diluted from 100% to 35%, though the company was now worth 50x more.
Origin
Basic equity mathematics, central concern in venture-backed companies since the origin of the asset class.
Fun Fact
Founders typically own 20-30% of their company by the time of a successful exit, proving that a small slice of a large pie beats a whole slice of no pie.
Source: Startup equity allocation and cap table management
Related Terms
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See “founder dilution” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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