Definition
What is dilution?
Dilution is the decrease in your ownership percentage when a company issues new shares — for example in a funding round or when it creates an option pool. You own the same number of shares, but a smaller slice of a (hopefully) larger company.
Each priced round typically dilutes existing shareholders. Founders model dilution across future rounds to understand what they are likely to own at exit.
General information, not legal, tax or investment advice.