Venture
Dilution
Dilution is the reduction in an existing shareholder's percentage ownership of a company that occurs when the company issues new shares — most commonly to raise capital in a new funding round, or to fund a new option pool for employees.
Dilution reduces percentage ownership without reducing the number of shares a holder owns — the pie gets more slices, not smaller slices for existing holders. Whether dilution is "worth it" depends on whether the capital raised increases the company's total value by more than the percentage given up.
Option pool top-ups are a frequently underestimated source of dilution: investors in a new round typically require the company to expand its option pool before the round closes, and that new pool dilutes existing shareholders — not the incoming investors — which is a common point of founder surprise during negotiations.
Example
A founder owning 10% of a company before a round that issues new shares equal to 20% of the post-round company now owns 8%, even though the number of shares they personally hold hasn't changed.