Option pool

Shares set aside to grant to future employees.

Example

A 10% pool created before a seed round.

Important

Investors usually require the pool to be created BEFORE the round, which means it dilutes the founders alone, not the new investor. This is called the option pool shuffle and it is negotiable.

Related terms

• Dilution — When new shares are issued, existing shareholders own a smaller percentage of the company than before.
• Cap table — The record of who owns what part of the company — founders, employees, option pool and investors.
• Employee equity — Ownership granted to employees, usually as stock options from the option pool, vesting over time.
• Stock options — The right to buy shares later at a price fixed today (the strike price).

Lessons that explain it

• Dilution — what you actually give up — Owning less of more can be better than owning all of little. But only if you know which one is happening. (12 min)
• Reading a cap table — Who owns what, in what class, and what happens when the next round lands. (12 min)
• Reading a term sheet — Two to four pages that decide the next several years. What each clause means and which ones actually matter. (15 min)
• Compensation and employee equity — Salary, equity, and how to explain a grant honestly to someone who has never held one. (15 min)

All 176 terms in the Founder glossary