Dilution refers to the reduction in an existing shareholder's ownership percentage resulting from the issuance of new shares to third parties — incoming investors, option scheme beneficiaries, convertible note holders. It can be percentage dilution (reduction in ownership fraction) or value dilution (reduction in per-share value if new shares are issued below current fair value — a down round). In fundraising, precisely modelling dilution — immediate and potential (fully diluted basis) — is essential for planning successive rounds and preserving sufficient founder ownership through to exit.

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Example: a founder holds 80% of a startup (800,000 shares of 1,000,000). A Series A raises CHF 3.0 million at CHF 12.0 million post-money (CHF 12/share), creating 250,000 new shares. Post-Series A: founder holds 800,000 / 1,250,000 = 64% — 16-point dilution. If a 10% ESOP pool (125,000 shares) is simultaneously created, fully diluted dilution is 800,000 / 1,375,000 = 58.2% — 22 total dilution points. Modelling this accurately is critical for founders assessing the true cost of each financing round.

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Hectelion models multi-round dilution scenarios to help founders plan capital structure and preserve economic position through to exit.