Definition
Dilution is what happens to your percentage when new shares are issued — a raise, an option pool, or a conversion. The pie gets larger; your slice can get smaller even as the rupee value of the slice goes up. Founders should model dilution before they celebrate a valuation.
In the room
How the word shows up in a real conversation.
You own 40% of a company worth ₹10 crore on paper (₹4 crore). After a raise and a pool top-up you own 28% of a company worth ₹25 crore (₹7 crore). You were diluted and still got richer. Both facts are true.
Formula
New ownership % = your shares ÷ fully diluted shares after the issue
Common mistake
Optimising only for “I kept 50%” and turning down a round that would make the 30% worth more. Percentage is not the same as outcome.
See also
Cap table
The ledger of who owns the company: shares, options, and what converts later.
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Pre-money valuation
Company's valuation before receiving investment funding, used to determine the price per share for investors.
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Post-Money Valuation
Company's valuation after receiving investment funding, including the new capital in the total value.
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Vesting
Earning equity over time so unearned shares come back if someone leaves early.
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