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With each funding round, ownership percentages shift as new shares are issued. Your original shareholders (including yourself) will experience some degree of ownership dilution as the total number of outstanding shares increases. Dilution is when the percentage ownership of existing shareholders, including the token owner, decreases when the token owner issues new shares during a fundraising round. For example: let’s say your personal token has 10 million total shares, and you own 9 million (90%) after an initial fundraising round where investors purchased 1 million shares (10%). If you decide to raise more capital by selling an additional 1 million new shares, the total share count increases to 11 million. After this second round, you would own 9 million out of 11 million shares (approximately 81.8%), while your initial investors would own 1 million out of 11 million (approximately 9.1%). To create alignment with early investors who take the highest risk, personal tokens incorporate certain protections borrowed from traditional equity structures:1
  1. Pro rata rights: existing shareholders have the right (but not obligation) to participate in future funding rounds to maintain their ownership percentage. This gives early believers in your potential the opportunity to continue supporting your journey without being diluted.
  2. Information rights: shareholders must receive notice of an upcoming fundraising round at least a week in advance so that they have time to exercise their pro rata rights.
  3. Anti-dilution provisions: if you raise capital at a valuation lower than previous rounds (a “down round”), the Network will automatically adjust share allocations to protect early investors from severe dilution, similar to weighted-average anti-dilution provisions in traditional venture financing.