At the time of business formation, most entrepreneurs own 100% of their company’s outstanding shares. As entrepreneurs raise funds from equity investors or make shares available to employees through stock option plans, the founder’s percentage ownership in a business falls. This is called “dilution.”

The amount of dilution entrepreneurs “suffer” from each round of equity financing is based on the amount of funds raised for business advancement, the negotiated valuation of a business at the time of each funding and other deal terms that can further reduce an owner’s stake in a business.

Highly ambitious entrepreneurs who raise one or more rounds of funding from angels and venture capital investors might own an equity stake that falls within the following percentage ranges:

10% - 12% reserved equity pool for incoming executive managers

10% - 15% stock option pool for all employees

30% - 60% for investors

25% - 50% for the founders