The option pool, and the pool shuffle that costs founders real percentage points

An option pool is a block of shares set aside for people you have not hired yet. That is all it is.

The mechanics are trivial. The timing is where founders lose points they never see coming.

Why reserve shares at all

You could issue options grant by grant as you hire. Nobody does, for two reasons: each issuance needs board approval, and investors want the dilution from your hiring plan visible now rather than arriving in instalments.

So you reserve a block — say 1,500,000 shares out of a fully diluted 11,600,000, about 13% — and grant out of it as you hire. The reserved-but-ungranted portion sits on the cap table as its own line.

Size it from a plan, not a rule of thumb

“10 to 15%” is the standard answer and a lazy one. Build it from the roles you will actually hire before the next round:

Role	Grant	Shares
VP Engineering	1.2%	139,200
2 × Senior engineer	0.4% each	92,800
Head of Sales	0.8%	92,800
3 × Early employee	0.15% each	52,200
Buffer / refreshers	—	130,000
Total		507,000

If your plan needs 507,000 shares and someone proposes a 1,500,000-share pool, you now have a specific argument rather than a feeling. A hiring plan is the only thing that wins this negotiation.

Now the expensive part: when the pool is created

Your company: 10,100,000 shares fully diluted, no pool yet. An investor offers $2,000,000 at an $8,000,000 pre-money valuation — a $10,000,000 post-money — and wants a 10% post-round option pool.

Two ways to do that, and they are not equivalent.

Version A — pool created pre-money (the standard ask)

The pool comes out of the pre-money valuation, so the ownership must work out to: investor 20%, pool 10%, everyone else 70%.

existing shares ÷ 70%  =  10,100,000 ÷ 0.70  =  14,428,571  total post-round
investor 20%                                  =   2,885,714  shares
new pool 10%                                  =   1,442,857  shares
price per share = $2,000,000 ÷ 2,885,714      =      $0.6931

Holder	Shares	%
Founder A	6,000,000	41.58%
Founder B	4,000,000	27.72%
Advisor	100,000	0.69%
Option pool (new)	1,442,857	10.00%
Investor	2,885,714	20.00%
Total	14,428,571	100%

Version B — pool created post-money

Same money, same headline valuation, pool created after the investment so everyone shares the dilution:

existing ÷ 80%  =  10,100,000 ÷ 0.80  =  12,625,000   after investment
investor 20%                          =   2,525,000   shares
price per share = $2,000,000 ÷ 2,525,000 =    $0.7921
then add a 10% pool: 12,625,000 ÷ 0.90 =  14,027,778   total
new pool                               =   1,402,778   shares

Holder	Shares	%
Founder A	6,000,000	42.77%
Founder B	4,000,000	28.51%
Advisor	100,000	0.71%
Option pool (new)	1,402,778	10.00%
Investor	2,525,000	18.00%
Total	14,027,778	100%

The difference

	Founders combined	Investor
Version A (pre-money pool)	69.30%	20.00%
Version B (post-money pool)	71.28%	18.00%
Difference	−1.98 pts	+2.00 pts

Same $2,000,000. Same “$8M pre.” Two percentage points of the company moved, purely on when the pool is deemed to exist.

And notice the share price: $0.6931 in Version A versus $0.7921 in Version B. The pre-money pool quietly lowers the price the investor pays per share, which is another way of saying the real pre-money valuation was never $8M — it was $8M minus the pool.

What to do about it

Expect the pre-money ask. It is the market standard, and walking in outraged does not help.

Negotiate the size, not the principle. A defensible hiring plan for 8% beats an undefended 15%, and the points you save are worth more than the argument about timing you will probably lose.

Quote yourself the effective pre-money. In Version A, an $8M pre-money with a 10% pre-money pool is economically a $7M pre-money. Compare offers on that basis and surprisingly often the “higher” valuation is the worse deal.

Do not over-reserve. Unallocated pool shares dilute you and benefit nobody. An oversized pool left over at the next round gets counted as existing dilution and the investor asks you to top it up again anyway.

Next

Part 4: vesting. The pool is shares set aside — vesting is how those shares are actually earned, and it is the part employees most often misunderstand about their own grant.