Equity is a share of the company. As the company sells new shares (in funding rounds), there are more shares total — and each existing share owns a smaller piece. This is dilution. It's not 'unfair' — it's how venture financing works — but it surprises people who don't model it.
Round-by-round math
Take a seed hire with 100K shares out of 10M total (1%). After:
- Series A (20% dilution): now 100K / 12.5M = 0.8%
- Series B (15% dilution): now 100K / 14.7M = 0.68%
- Series C (15% dilution): now 100K / 17.3M = 0.58%
- Series D (12% dilution): now 100K / 19.7M = 0.51%
- Series E (10% dilution): now 100K / 21.9M = 0.46%
From 1% at hiring to 0.46% by Series E — less than half. The absolute dollar value can still be much higher if the company grew faster than dilution shrank you (it usually does).
When you receive a grant at a late-stage company, you're getting smaller percentage ownership of a larger pie. The math usually works out — the pie grows faster than your slice shrinks — but if growth slows, dilution becomes the dominant factor.