At most you have then option to buy into further rounds, so you keep your percentage the same.
They are probably extremely rare for general employees, but they are not rare for people who have negotiating power (eg: C level executives.)
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Apparently I am blocked from responding too often as a new account, so adding here because I can't add a new comment to the parents parent:
It really is quite shocking how often people act like these things are not the business of employees. On one hand they want you to take a lower salary, and they claim that options will make up for it, but on the other hand they think it is somehow unreasonable for you to ask basic questions necessary to value the options?
I recently had a CFO act incredulous when I requested a copy of the Stock Option plan. Like I didn't deserve to have a copy of it, even though he was requiring me to sign a contract agreeing to its terms.
At that point I basically wrote off the options, and have written off the company and am on my way out.
The reason they get away with this kind of obfuscation is, I think, that most engineers just go along to get along and aren't too demanding.
Unions would be worse, but we need to start sticking up for ourselves a lot more.
For an overview, see [1].
This is historically unusual. Up to the last decade, companies tended to become profitable and go public much earlier. Now we have round after round of private financing going into money-losing companies to fuel rapid growth, in hopes that, somehow, they'll dominate the industry and make the money back someday.
That may not happen. Twitter won on market share and still can't make money. Uber may be next.
[1] https://techcrunch.com/2011/10/13/understanding-how-dilution...