Dilution happens like shit happens. If you raise money, hire staff, engage in M&A, give shares to lawyers when you were broke, you are going to get diluted
11 Jun, 2017E27.CO
No one was born knowing everything; You have to learn at some point and in some way. How you make money in a startup is one such point. It sounds easy though, right? You startup, get a bit of cash and then sell for a chunk of change and start driving a Tesla. Only it’s a bit more complicated than that.
You start owning the whole of your company, and if you bootstrap and don’t give any shares to staff you will continue to own all of it. But that’s not normal for most tech startups these days, since along the way, other people get a cut of your company and so upside when you hopefully exit. Others getting a cut is called dilution, and it’s what we are going to get into in detail. Only, we aren’t going to do the basic version, we’re going to learn about the impact of ESOPs (Employee Share Ownership Plan) on this ‘dilution’ too. In this way you can understand how your staff get rich too....
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