> That means everybody gets diluted including the founders, the angels, the VCs, and yes the employees too.
founders, angels, and early round VCs can simply issue themselves more stock from the pool of unissued shares to counteract dilution.
founders, angels, and early round VCs can simply issue themselves more stock from the pool of unissued shares to counteract dilution.
However, what you describe is highly questionable and borderline illegal. It's certainly grounds for a lawsuit by other shareholders (including options holders).
I know I'm missing a lot of info, and its just a second hand example, but it seems in line with grand parent post's idea that for each type of financial tool, there's at least one gotcha you need to be aware of.
However to issue those to yourself would be like eating your seed stock, since that's the pool that you use for issuing options to new hires, and without that you can't give new employees any equity. For that reason I don't think it's likely.
Can you explain why they can't? I was under the impression that this actually does happen.