dilution

The dilution is negligible since the stock is valued by the revenue (not profit so much).

Thus every existing holder gets an equal amount of dilution, and the number of conceivable rounds is infinite.

Pro rata doesn't apply to employee option pool dilution, so it's really probably only 5% of a round.

In practice, dilution as a simple function of outstanding shares is a fact of life, expected by everyone who invests.

Most arguments for self funding focus on the dilution of equity that comes with investment but there are many other arguments.

What then to do after the founding stage to avoid dilution to its initial investment stake without jeopardizing credibility with founders?

I think that puts the opposite into perspective, how much adding an engineer affects dilution (hard to notice).

Usually the dilution doesn't matter because the valuation goes up so much each funding event that you still end up ahead in total value.

So how to maintain that goodwill and still avoid subsequent dilution in the various investment rounds that inevitably follow from the inception of star-quality companies?

The document includes a 1x preference, anti-dilution, board seat, etc.

Unlike most computer companies that funded their growth by issuing stock, An Wang had used debt to avoid further dilution of family control of the company.

In serious financing rounds, the company sells preferred shares which have shareholders agreements attached that might protect investors against dilution, for instance by allowing those shares to convert into common shares at a rate that accounts for any dilution.

Dilution really doesn't matter that much - your chances of getting anything are vanishingly small.