Equity Dilution

What The Hell is Equity Dilution?

Equity Dilution is what happens to your ownership when a company creates new shares Shares = the slices your company is cut into. Own more slices, own more of the company.

Your slice of the company shrinks even though you never sold anything.

Founders track how much money they raised. Very few track how much of their own company is left.

Real World Example & Calculation:
-> You start a company with 10,000 shares. All 10,000 are yours, so you own 100%.
-> An investor puts in ₹50 lakh. You create 2,500 new shares and hand them to him.
-> Total shares are now 12,500. You still hold 10,000. That is 80%.
-> Two years later a bigger investor puts in ₹5 crore. You create 12,500 more shares.
-> Total shares are now 25,000. You still hold 10,000. That is 40%.

You never gave away a single share you owned.

But once you drop under 50%, the people who own the rest can vote on what happens next.

That is how a founder gets removed from the company they started.

✍🏻 Mantra Joshi

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