https://preview.redd.it/gqoan93lnvcd1.png?width=378&format=png&auto=webp&s=169d26184c1073bd24b22cc51378b4d919ad859f

Dilution is not neutral and shouldn't be viewed as such.It's either positive or negative, good or bad.

In the world of VC-backed companies, dilution is such a normalized part of the journey that it is often passively accepted.

This often leads to the negative form of dilution such as capital raised for:
→ inefficient sales and marketing spend
→ R&D supporting technology searching for a market
→ layers of unnecessary organizational overhead
→ supporting broken business models
→ vanity valuations
→ etc...

However, dilution has a positive and accretive expression as well such as capital raised for:
→ scaling efficient go-to-market efforts
→ product and channel expansion with clear ROI
→ deleveraging and strengthening the balance sheet
→ accelerating market share gains for a sound business model
→ transformative investments (e.g. M&A, R&D, capex)
→ etc...

Therefore, dilution should neither be passively accepted nor should it be categorically prohibited. It shouldn't be viewed as always positive or always negative because it can be either.

The purpose and quality of the use of capital is what ultimately defines the merit of any dilution. For this reason, capital allocation is one of the most essential responsibilities and capabilities of a CEO.

Effective capital allocation leads to dilution being positive. Ineffective capital allocation leads to dilution being negative. It's usually that linear.