The Option Pool: What It Is and How It Impacts You

An option pool is a slice of your company set aside for future hires. It helps attract talent — but it also dilutes founders. How and when the pool is created matters, especially during fundraising negotiations.

Why it Matters

Investors often ask founders to expand the option pool before they invest — meaning the dilution comes out of your stake, not theirs.

Understanding how to size, use, and negotiate the pool is critical to protecting founder equity while building a great team

Founders Checklist

Standard option pools are 10–20% depending on stage
Option pools are part of the pre-money valuation in most terms
You can negotiate to share the dilution with investors
Pools should reflect hiring needs, not arbitrary percentages
Unused options return to the pool — they don’t go away

Founder Fails

Accepting a large pool increase without negotiation
Letting the investor set the size with no pushback
Not forecasting how much is needed for hiring
Confusing option pool with cash comp or benefits
Failing to explain the pool to future employees or co-founders

When to ask for Help

You’re negotiating a term sheet with an investor
You’re unsure how big the pool should be based on your hiring plan
You want to model the impact of different pool sizes on your equity
You’re trying to reduce or restructure the pool post-funding
You’re planning international hires or unusual equity structures

Frequently Asked Questions

Q: What’s the difference between granted and ungranted options?
A: Granted = already given to employees. Ungranted = still available. Both are included in the pool.

Q: Do founders get options too?
A: Founders usually get restricted stock, not options. But if you’re late-joining or switching roles, you might receive options too.

Q: Can I shrink the option pool later?
A: Yes — with board/investor approval. But you’ll likely need to justify it with a clear hiring plan.