Equity Dilution
Definition
The reduction in a shareholder's proportional ownership of a company resulting from the issuance of additional shares or the conversion of equity-linked instruments. Equity dilution is measured as the change in ownership percentage. It occurs at every funding round, option grant, SAFE conversion, and warrant exercise. The fully diluted cap table is the tool for tracking and modeling equity dilution across all instruments.
Common Misapplication
The most common misapplication is calculating equity dilution only from new shares issued in a round without accounting for the concurrent conversion of outstanding SAFEs and convertible notes. SAFE conversion at round closing is a dilutive event that occurs simultaneously with the new share issuance and must be included in the post-round ownership calculation.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.1: The Cap Table Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Equity Dilution. https://ffistandard.org/glossary/equity-dilution/. 2026.