Investopedia

Continue to Site »

Diluted Founders

Filed Under » , ,
Dictionary Says

Definition of 'Diluted Founders'

A slang term often used by venture capitalists to describe the process by which the founders of a startup gradually lose ownership of the company they founded. As a startup that is using venture capital for funding progresses through multiple rounds of financing, the venture capitalists providing the financing will often want more and more ownership of the company.

In other words, the founders dilute their ownership in the company in exchange for capital to grow their business.
Investopedia Says

Investopedia explains 'Diluted Founders'

What percentage of the company should a founder hold onto, ideally, after the venture capitalists take their piece of the pie? There is no gold standard, but generally anything between (or above) 15-25% ownership for the founders is considered a success.

It is important to note that the trade of ownership for capital is beneficial to both venture capitalist and founder. Diluted ownership of a $500 million company is a lot more valuable than sole ownership of a $10 million company.



Articles Of Interest

  1.

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.

  2. 7 Unconventional Ways Businesses Can Borrow Money

    Find out how your business can get the money it needs - even when the bank says "no".

  3. Should You Head Back To Business School?

    Find out if an MBA is necessary for you to reach your professional goals.

  4. Women And Finances: Is There A Gender Bias?

    Uncover some very complex reasons for female gender biases in the finance world.

  5. Female Entrepreneurs Are Surpassing Their Male Counterparts

    The world of entrepreneurship is constantly changing; the last year has seen a significant shift in the performance of female entrepreneurs.

  6. Small Business: Speed Up Receivables To Avoid A Cash Crunch

    Waiting for customers to pay can be a losing game. Look to factoring for quicker cash.

  7. Build Your Small Business During Downswings

    Here we offer some cost-saving measures to strengthen your business even when the market is weak.

  8. In Small Business, Success Is Spelled With 5 "C"s

    Incorporating these steps will help your business thrive in a competitive market.

  9. Famous Advice From Successful Entrepreneurs

    These famous quotes from some of the most successful entrepreneurs of all time can be used as inspiration for your entrepreneurial dreams.

  10. Are You An Entrepreneur?

    Many people want to start a business, but not everyone has what it takes to succeed.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center