How does equity diution occur while raising money from investors?



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hi sir , i was going through money raising video , just want to get a clarity on equity dilution term , is it means to sell equity stake in the company through QIP ,FPO Route OR it has any other meaning , it wd be great if u can give me some clarity on this term , iam somewhat confused with this term as it is highly used in business parlance

1 Answer(s)


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Rohit,

Yes, equity dilution does mean to sell equity stake to an institutional investor or an individual investor in return for cash or some other kind of benefit from that investor.

Typically you will decide on a pre-money valuation of the company based on the company as is. Then based on this pre-money valuation you will dilute a % to the investor in return for cash.

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