Diluting shares should be straight out illegal. There is no reason for it other than fucking over employees. You know, the people who have actually worked to make the company a success.
In egregious cases, you could probably sue the board and win. Another user here discussed an example where employees were diluted to a literal penny right before a sale.
If the employees didn't win in that case, then there's some fundamental, structural flaw in American laws.
Really? Give me one example where it doesn't fuck over the employees?
And don't say "they get to keep their jobs", cause if that's all that's needed for benefit, we might as well devalue the options to 1 cent, cause after all, they still got to keep their job.
Shares need to come from someplace. Other people selling shares to the VC doesn't put any money into the company. The company needs to sell shares, and create shares if it doesn't have any left.
It's often abused, and easy to abuse, but you are making the story too pat by saying it exists only to screw over employees.
If the employees didn't win in that case, then there's some fundamental, structural flaw in American laws.