Option pools: why the pool comes out of your share.
An option pool is stock set aside for future hires. When investors ask you to create or top it up before they invest, the cost lands on you and your existing holders.
The short answer
Investors usually ask for the pool to be created or enlarged in the pre-money, so only existing holders are diluted by it. That lowers your effective valuation. Size the pool to a real hiring plan for the next 12 to 24 months, not a round number.
Example: $2M at $8M pre-money, with a 10% post-money pool in the pre
70% founders and existing holders keep
Example arithmetic only. Without the pool, existing holders keep 80%. The pool costs them 10 points.
- Founders and existing: 70%
- New investors: 20%
- New option pool: 10%
The option pool shuffle
Say an investor offers $2M at an $8M pre-money and asks for a 10% pool, measured after the round, included in the pre-money. The post-money is $10M and the investor owns 20%. The pool takes another 10%, and it all comes from existing holders, who drop to 70%.
Your headline pre-money is $8M, but the value of the shares you already held is $7M. The other $1M is the new pool. Founders call this the option pool shuffle. It is standard practice, so the real negotiation is the size of the pool, not whether it sits in the pre-money.
How to size the pool
Build a hiring plan for the period until your next round. List each role, its seniority and a reasonable equity grant for that role. Add the totals, plus a buffer for surprises. A plan like this is the best argument against a pool larger than you need, because unused pool still diluted you.
- Is the pool measured pre-money or post-money?
- How many unallocated options do I already have?
- Which hires does this pool need to cover, and until when?
- Do promised but ungranted options count against the new pool?
Terms to know
Option pool
Shares reserved for future grants to employees, advisors and directors.
Option pool shuffle
Creating the pool in the pre-money so only existing holders bear its dilution.
Vesting
Earning options over time, often with a one-year cliff.
Does your deck show the hires this round pays for?
A clear hiring plan supports both your round size and your pool size. Upload your deck and we show you whether the use of funds holds up.
Questions founders ask
Why don't investors share the pool's dilution?
They price the round on the shares they expect at closing, pool included. Putting the pool in the pre-money protects their percentage. You can still negotiate the size.
Do SAFEs count the option pool?
In the post-money SAFE, the pool that exists or is promised before the priced round is included in the company capitalization the SAFE converts against. Check your exact documents with a lawyer.
Sources
Sources: standard venture financing practice; YC post-money SAFE user guide. Not legal, tax or financial advice.
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