While most people tend to understand how Dilution works at a high level, it’s important to understand how it works over time.

Each Funding round, or in the case of employees, each round of stock issuance will typically dilute the entire pool of stakeholders.

The chart in this video shows how this works. Note that when we take on a Co-Founder we might dilute our 100% stake down to 50%. But after that, every additional issuance of stock dilutes everyone else the same amount.

So our 50% stake, when diluted by 7% in our Pre-Seed Round, dilutes by 7% of 50% - which is a total of 46.5% remaining. That’s not the same as “We lose 7 points of our 50 points” of equity which would be 43%.

Even when investors join, each round of funding (or employee stock) dilutes equally from their equity % as well.