Fundraising

Dilution

When new shares are issued (to investors or employees), each existing owner's percentage of the company shrinks — even though the company is usually worth more overall.

Example

Selling 20% to investors dilutes the founders from 100% to 80% ownership.

Related terms

Cap Table

A list of everyone who owns a piece of the company — founders, investors, employees with options — and how much each holds.

ESOP

A pool of shares set aside to give employees ownership in the company, usually earned over time. A key way startups attract talent without huge salaries.

Valuation

How much your company is judged to be worth. 'Pre-money' is the value before new investment; 'post-money' is pre-money plus the money raised.

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