Equity, funding & dilution

When a startup raises money by selling new shares, it gains cash but the founders' slice of the company shrinks — that is dilution. Ownership is measured in equity (shares); issuing new shares to investors means existing owners now hold a smaller percentage of a (hopefully larger) whole. Each funding round trades a piece of the company for capital and a higher valuation, so the aim is that a smaller slice of a much bigger pie is worth more than a big slice of a small one. But dilution is a real cost: raise too much too early, or at a low valuation, and founders can end up owning little of what they built. Funding buys runway — time to reach profitability — but it isn't free money; equity given away doesn't come back, which is why founders weigh how much to raise, and when, against the control and upside they trade for it.