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Definition of Dilution

Dilution refers a decrease of ownership in a startup on a percentage basis. For example, if Mary owns 10 shares in Acme Inc., and Acme Inc. has a total of 100 outstanding shares, then Mary owns 10% of the company. But if the company sells an additional 25 shares to new investors, then Mary's ownership percentage would be diluted from 10% to 8%.

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