Option Pools — Sizing and Strategy

An option pool sets aside equity for future hires. The size and timing of the pool—especially in fundraising negotiations—affect founder ownership and investor stakes.

Why it Matters

Your option pool is equity you reserve for future hires. VCs often require you to expand it before their investment — shifting dilution to you. Managing the pool wisely protects your ownership and attracts talent.

Founders Checklist

Forecast headcount growth and equity needs for the next 18–24 months
Create an initial pool of 10–20% depending on stage and team size
Negotiate whether pool expansion happens pre- or post-money
Update cap table and 409A valuation after pool adjustments
Communicate equity philosophy clearly to candidates and team

Founder Fails

Accepted 20% pre-money pool expansion > lost more equity than expected
Created a pool too small > forced to expand at lower valuation
Didn’t update cap table > mismatched strike prices and valuations

When to ask for Help

Before a funding round, especially if investors require a “pre-money” pool
To model dilution impact based on different pool sizes
When refreshing or increasing the pool as you grow
To align pool strategy with hiring plans
If negotiating pool terms with co-founders or investors

Frequently Asked Questions

Q: What’s a typical option pool size?
A:

Pre-Seed: 10–15%
Seed: 15–20% (often required by investors)
Series A+: 10–12% (smaller, more targeted)

Q: What does “pre-money pool expansion” mean?
A: It means the pool is carved out before the investor’s money goes in — diluting founders more than investors. It’s standard but negotiable.

Q: Can we “reclaim” unused options later?
A: Yes — ungranted options remain in the pool and don’t dilute you further unless refreshed or expanded.