Founders now give up less of the company at every stage

The record

On 11 September 2024, Carta published an analysis titled 'Why is dilution declining?', reporting that median dilution, which it defines as the round size in a primary funding event divided by the pre-money valuation, has fallen at every stage from seed to Series D over roughly the prior four and a half years. The report attributes the decline to two mechanical drivers acting at different times: through the early 2020s, both round sizes and valuations rose, but valuations rose faster, lowering dilution; after the market turned in mid-2022, both fell, but round sizes fell faster, which lowers dilution by the same arithmetic in the opposite market.

What the sources establish

An earlier Carta release, its Q4 2023 report published 5 February 2024, supplies a concrete stage-level number consistent with that trend: median dilution on new Series B financings in the fourth quarter of 2023 was 16.3%, down from 21.1% a year earlier. Separately, Y Combinator's own seed-fundraising guide states the accelerator's long-standing benchmark from the founder-guidance side: most rounds will require up to 20% dilution and founders should try to avoid more than 25%, and it works through an example round, a $1,000,000 raise on a $5,000,000 pre-money valuation against 10,000,000 existing shares, that produces 16.7% dilution rather than the 20% a reader might assume from the headline numbers alone.

Scope and revision

Carta's dilution dataset explicitly counts only primary priced funding rounds; it states plainly that bridge rounds and convertible notes are excluded from the measured population even though, in the report's own words, they are 'still dilutive events.' The report quotes a venture lawyer warning that convertible notes stacking up outside a priced round can produce a 'dilution tsunami' when they eventually convert, a cost the headline dilution figures for primary rounds do not capture. Because bridge financings have become more common at every stage from seed to Series C over the same period, part of the measured decline in primary-round dilution may reflect fewer, cleaner primary rounds in the sample rather than universally lower dilution across all financing activity.

The decision in front of you

As editorial guidance beyond what any single report states, a founder building a multi-round ownership model should track dilution across the full sequence of instruments actually used, including SAFEs and notes at their eventual conversion price, not only the primary priced rounds a provider's dataset happens to measure, and should treat a single stage's reported median as one data point rather than a target.

• Does a reported dilution figure include or exclude bridge rounds and notes outstanding at the time?
• Is the benchmark a median for a specific stage, or a blended figure across stages?
• What will an outstanding SAFE or note actually convert to once the next priced round sets a price?

A declining median dilution figure describes primary rounds that closed; it does not describe the dilution still sitting, unconverted, in every note and SAFE a company has already signed.