How Does Post Money Valuation Affect Equity Dilution?
Equity dilution occurs when new shares are issued, reducing the ownership percentage of existing shareholders. Post money valuation directly affects this dilution. The higher the post money valuation, the lesser the dilution for existing shareholders. For example, if a company with a pre-money valuation of $1 million issues new shares worth $250,000, the original owners dilute their ownership proportionally.