>You might get a smaller slice of a bigger pie, but it may also represents a smaller real-world valuation if you get diluted too far.
Show example math of how someone could get "diluted too far" resulting in less total value (shares x price) after an investment round that prices the company higher than before. If the total value was truly less, it means it was "down round" which is a different beast.
>, you could be diluted away to nothing.
Show how it is mathematically possible to dilute employee's 1% ownership in to 0% without illegal tricks.
When Mark Zuckerberg tried to dilute Eduardo (without also diluting the other owners), he tried to hide the reduced % via a newly created company. He got sued for the financial deception and lost.
I'm somewhat new to this topic (and therefore might not understand correctly) but another user, 'oillio', made a response in a different thread [0] which could explain 'getting diluted away to nothing', for example, an investor invests money causing dilution, the company squanders the money or uses it on something that doesn't positively affect the company trajectory. You now own a smaller slice of a pie which is the same size as it was before.
Using his example, if you estimate the value of a company to be 100M and estimate 10 years until IPO, if the investment doesn't raise the value of the company at the time of the IPO in 10 years then the dilution is not good for the employee because the pie is the same size (100M) but his/her shares have been diluted.
Seems like it's pretty difficult to estimate the value of the company in 10 years or the IPO date though which is probably why people just use the amount invested to estimate the value of the company.
Show example math of how someone could get "diluted too far" resulting in less total value (shares x price) after an investment round that prices the company higher than before. If the total value was truly less, it means it was "down round" which is a different beast.
>, you could be diluted away to nothing.
Show how it is mathematically possible to dilute employee's 1% ownership in to 0% without illegal tricks.
When Mark Zuckerberg tried to dilute Eduardo (without also diluting the other owners), he tried to hide the reduced % via a newly created company. He got sued for the financial deception and lost.