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Dictionary by pitch.dog
Cap table, ownership & dilution · Core

Dilution

Also called: equity dilution

ELI5

Existing owners own a smaller percentage after new shares are added.

Used in conversation

“The round creates dilution but may increase the value of the company.”

Definition

Reduction in an existing holder's ownership percentage when additional securities are issued or become outstanding.

Here “Dilution” means: Reduction in an existing holder's ownership percentage when additional securities are issued or become outstanding.

Pitch context

You will see “Dilution” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches cap table, ownership & dilution.

Why it matters: In cap table, ownership & dilution, a loose definition can change rights, obligations, approval, disclosure or enforceability.

Caution

Meaning, enforceability and required process vary by jurisdiction and agreement; this definition is not legal advice.

Connected terms

  • Down roundDilution is a reduction in ownership percentage or economics; a down round is a financing at a lower valuation that may cause dilution and anti-dilution effects.
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Sources & evidence · 5

Direct term-level sources and supporting source families.