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Entrepreneurship & Startups vocabulary · Equity & Valuation

Dilution

Meaning in entrepreneurship & startups, with examples

/daɪˈluːʃn/nounCommon term

In entrepreneurship & startups, dilution means: The fall in an existing owner's percentage of a company when new shares are issued, for example to new investors or for an employee option pool.

In Turkish: hisse sulanması, pay oranının azalması, seyrelme

How it is used

A normal part of raising money: founders get diluted in every round. People say dilute, get diluted and anti-dilution protection. Dilution lowers your percentage, but if the valuation rises, the value of your shares can still go up.

Example sentences

  1. We accepted 18 percent dilution in the seed round, which is fairly standard.

  2. Expanding the option pool means some dilution for all current shareholders.

Common collocations

  • founder dilution
  • minimise dilution
  • anti-dilution protection
  • get diluted
  • cap tableShort for capitalisation table: a list or spreadsheet that shows who owns what share of a company, including founders, investors, employees and options.
  • equityOwnership in a company, divided into shares. In startups, equity is what founders, employees and investors hold, and its value grows if the company succeeds.
  • option poolA part of a company's shares set aside for future employees, advisors and other team members, usually granted as stock options.
  • down roundA funding round in which a company is valued lower than in its previous round, so new shares are sold at a lower price than before.
  • funding roundA planned period in which a startup raises a set amount of money from one or more investors, usually on the same terms and at the same valuation.

More terms: Equity & Valuation

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