Dilution refers to the reduction in ownership percentage of existing shareholders in a company due to the issuance of new shares. This is particularly relevant for startup founders as they often seek external funding to grow their businesses, typically through [[venture capital]] or [[angel capital|angel]] investments. When new investors buy [[equity]] in the company, additional shares are issued, which dilute the ownership stake of the existing shareholders, including the founders. While dilution can provide necessary capital for scaling operations and achieving business milestones, it also means that founders may have less control over decision-making and a smaller share of future profits.