Founder Equity Dilution in a Startup: A Walk Through the Process

john
Mon, 04 May 2026 16:58:10 +0000
Starting Up

This article explains that founder equity dilution is an inevitable part of building a startup, occurring as the company grows, hires employees, and raises capital. It highlights how founders’ ownership percentages decrease over time through mechanisms like co-founder splits, employee stock option pools, and multiple funding rounds, as well as instruments such as SAFEs and convertible notes.

Rather than framing dilution as a negative outcome, the article emphasizes that it enables growth and can ultimately increase the value of a smaller ownership stake. It also underscores the importance of thoughtful planning, encouraging founders to manage their cap table strategically, understand how each financing decision compounds, and maintain meaningful ownership while bringing in the resources needed to scale.

Moonshots Capital – 10 Sep 24

Founder Equity Dilution in a Startup: A Walk Through the Process

Startup founders are among the most important people in our society: their ambition and creativity drive innovation, solve hard problems, and disrupt lazy incum

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