Issuing more shares is how dilution is done for new investment, typically. Existing shareholders give up a % of the company via dilution, but hold on to the number of shares they had before. Their existing shares just represent a smaller chunk of the company after investment. I can see how my explanation was not clear on what is being given up, and I don’t think giving up actual shares happens often, if ever.

On a side note, startups do sometimes reserve shares for future investors, i.e. hold it themselves until disbursed. Typically when a new investment round is imminent.

Think about it this way - before a new investment, the existing shareholders own 100% of the company. In order for a new investor to get equity in return for their investment, let’s say 10%, the existing shareholders have to collectively give up 10%, and their total is reduced to 90%. After the investment, the total ownership is again 100% (90%+10%).