Dilution Isn't the Problem. Not Understanding It Is.
Angels Decoded · June 2026
Ep#18 of our weekly podcast on what's actually happening in angel investing — hosted by Cheryl Kellond and Andy Walsh.
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Most angels hear the word dilution and flinch. Cheryl Kellond hears it and gets excited. By the end of this episode, you will too.
Cheryl and Andy break down why dilution is almost always a signal that something good is happening, the pie got bigger, and why the angels who panic about ownership percentages are missing the point entirely. The math is simple once you stop letting the word scare you.
The episode opens with a Portuguese tart and an Australian meat pie, because apparently that’s how you explain equity to people. But the analogy lands: a smaller slice of a much bigger pie is almost always the better outcome. What matters isn’t your percentage, it’s what that percentage is worth when the company exits.
Cheryl walks through what actually happens at each funding round, why angels shouldn’t follow VCs into follow-on bets, and the AngelList data on why doubling down is usually a mistake. The better move is more shots on goal, not more money into the same bet.
Cheryl unpacks cram down rounds, what they are, why founders use them, and why angels almost always misread them as opportunity when they’re actually a distress signal. If a company is trying to get you to reinvest by threatening to convert your preferred shares to common, that’s not an attractive deal. That’s a company in trouble using your fear against you.
She also shares the story that led her to build Play Money the way she did, a cram-down dressed up as a late-stage opportunity, a room full of angels leaning in, and deal terms nobody volunteered to show anyone.
What we cover
- Why dilution is a reason to celebrate, not panic
- How the pie analogy actually works across funding rounds
- The angel math: why more bets beats doubling down every time
- Cost basis and why your entry point determines your multiple
- What a cram-down round is and how to spot one
- The sunk cost trap angels fall into when companies struggle
- Play Money’s dilution calculator and how to use it
- Why transparency on deal terms changes everything
- Dilution Calculator letsplaymoney.com/decoded
You don’t need to be a VC to understand dilution. You just need to stop treating it like a dirty word.
Frequently asked questions
Dilution is the reduction in your ownership percentage when a company issues new shares, usually during a fundraising round. New investors get new equity, so everyone's slice of the pie gets smaller in percentage terms. But as this episode explains, that's almost always a signal something good is happening: the company raised more capital and the overall pie got bigger. What matters isn't your ownership percentage, it's what that percentage is worth when the company exits. A smaller slice of a much larger pie is usually the better outcome.
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