Please explain how equity % changes

Why not have your contact state that you automatically get x % of all newly issued shares? Obviously, Gates, Zuckerberg, Jobs had something to protect their percentage.

In short, you can't protect against having your stake diluted.

To keep it simple, assume that the company is always 100% allocated to the current shareholders after a given round (it often isn't, there are some shares reserved for certain things like new hires, but for the purposes of discussion this explanation will work).

Let's say a company has 10M million shares, allocated to employees and investors.

So, you have 10% (1M Shares), the founder has 50% (5M) and the other 40% (4M) is held by the Round A investors.

Now, it's time for Round B. All the current stock is allocated, so there are no shares to sell. This is solved by issuing more shares for the new investors to buy. The sum total of all the shares always has to be 100%. So if we issue another 10M shares, the company now has 20M shares of stock. You still have 1 Million shares, but it's 1 Million of 20 Million, instead of 1 Million of 10 Million. 5% instead of 10%.

This is a very simple explanation. It can be further complicated by the fact that you may have multiple classes of stock, or different terms for different share holders. It is common to have a provision such that if the Round A investors re-invest in Round B, then their shares do not get diluted, or get diluted less than your common shares.

In essence, almost any scenario for dilution is fair game, and precedence will always go to investors over option grantees.

Every time there is a new investment round, your stake will get diluted. When new stakeholders come in, the existing stakeholders have to lose some percentage of ownership. Hopefully, at each investment round, the value of the company will go up such that the value of your stake increases in dollar terms even though it goes down in percentage terms.

I'm not an expert on this, so hopefully someone else can provide greater details, but I it works something like this.

Suppose your company is valued at $5M before an investment round (often determined in some mysterious way) and the investor comes in and provides $5M to the company. The investor then owns 50% of the company. Your share will probably be diluted by about half in percentage terms, but if the company was valued at $1M when you got the shares, then their value has increased.

It gets really complicated in that there are different types and classes of shares, and there is the number of authorized shares vs. outstanding shares etc. Consider the above a rough approximation of how the process works.