Option Pool
Definition
A block of shares reserved for future issuance to employees, advisors, and consultants as equity incentives. Option pools are typically established before fundraising rounds, and their size (usually 10%-20% of fully diluted equity) affects both valuation and founder dilution.
Related Terms
Related FAQ
What is an option pool and why do founders care?
An option pool is a reserved block of shares (typically 10-20% of fully diluted equity) set aside for employee options. The size of the pool affects how much founders must dilute to hire team members.
Read full answer →What is the Cap Table and why does it matter?
A cap table (capitalisation table) lists all of a company's shares, options, and convertible securities, showing who owns what percentage of the company — it is essential for fundraising, dilution analysis, and exit planning.
Read full answer →What is the option pool shuffle and why is it controversial?
The option pool shuffle is a practice where founders and investors increase the option pool immediately before a Series A, diluting the founder's equity by distributing free options to new investors and the founder.
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