What is Equity dilution?
Equity dilution: Owners' percentage shrinks when new shares are issued.
Where Equity dilution fits
Equity dilution is part of Funding & Growth in Entrepreneurship. Startups fund growth through seed money, angels, venture rounds or bootstrapping. Runway is cash divided by monthly burn, and every equity round dilutes founders.
Practical tip
Start fundraising with 6+ months of runway, not 6 weeks.
Related terms
- Venture capital
- Funding for risky startups in exchange for equity.
- Burn rate
- How fast a company spends its cash, usually per month.
- IPO
- First time a company sells shares to the public.
- Pivot
- A major change of strategy based on what you learned.
- Seed funding
- The first outside money raised to start a company.
- Runway
- How many months a company can operate before its cash runs out.
- Series A
- The first major venture round after seed funding.
- Valuation cap
- The highest price at which an investment converts to shares.
Formulas you will use with it
Test yourself
Which term means: “Owners' percentage shrinks when new shares are issued.”?
Seed funding · Equity dilution · Valuation cap
Answer: Equity dilution
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