Startup & fundraising
Option Pool
Formula reviewed by Tahir Asif, CMA
A block of shares reserved for future employee stock options, usually sized to the hiring plan for the next 12 to 18 months.
An option pool reserves shares for employees, advisers and future hires. Investors often require the pool to be created or topped up before their investment closes, which places the dilution on the existing holders alone. This is called the option pool shuffle.
Creating the pool before the investment lowers the price per share and the effective pre-money valuation. Creating it after the investment dilutes everyone, including the new investor, and leaves the price per share unchanged.
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