Yes, your analogy is faulty.<p>First, what you're given is a number of shares, not a fixed percentage of the company - if you're given 100,000 options at the start of the year, you still have 100,000 options at the end of the year.<p>Second, the dilution that occurs through the issuing of shares to investors <i>should</i> make the company more valuable, not less - because the company takes that money and grows with it.  Your shares are a smaller percentage of the overall company but end up worth more in absolute dollar terms.  (If that's not the case, the company is wasting other people's money - the value of your shares goes down, but this is deserved.)<p>In other words, if you go from a 1% stake to a 0.1% stake through dilution and then get $20K of a $20M sale, you haven't been ripped off, you just overestimated the company's ability to turn your initial 1% stake into something meaningful.