Dilution
In accounting, dilution means the fall in a holder's percentage when new shares are issued. The holder's share count does not change; a round priced high enough can dilute ownership and raise the value of the stake at once.
Not a rule. Arithmetic — not codified. US GAAP governs recognition, measurement and presentation, not bookkeeping mechanics. Sources
The lesson that teaches this
From the free founder back-office course, taught on one company's books, with exercises to work it yourself.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Burn rate and runway: how to calculate them correctlyGross burn, net burn and months of runway, done the way an investor checks them: from cash, averaged, and with the hires you’ve already committed to.
- How to account for SAFEs on your balance sheetA SAFE is cash today and shares later. Why it usually sits with liabilities, how the cap and discount set conversion, and what to book at the priced round.
- Stock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.
What it is not called
Each of these means something else. Use one here and an accountant reading the product notices.
- loss
- down round
Nearby in the catalog
No component names this concept outright. These sit in the same part of the system.
13Metrics & analysis
Family specAlso in Equity & financing
Defined in Lexicon. This page is generated from that document, so the two can't disagree.