Option Pool

An option pool is the block of startup equity reserved (but not granted) for stock options to current and future employees, advisors, and consultants. It is sized as a percentage of fully diluted shares and replenished at most priced rounds. It's created on the cap table as authorized-but-unissued shares within the Equity Incentive Plan, and grants are pulled from it over time as the company hires.

Typical pool sizes by stage (2025 Carta and PitchBook benchmarks):

Stage	Pool size (% of post-money)	What it has to cover
Pre-incorporation / formation	10-15%	Founders + first 5-10 employees
Post pre-seed (SAFE)	10-15%	First 10-15 hires
Post priced seed	12-18%	Engineering team build-out, first sales hires
Post Series A	15-20% (top-up)	Engineering, sales, executive hires through next round
Post Series B	12-18% (top-up)	Continued scale, executive hires
Post Series C+	10-15% (smaller top-ups)	Executive hires + selective refresh

The mechanics of the option-pool refresh at a priced round:

1. Investor specifies target post-money pool size (e.g., "15% post-money pool").
2. The pool top-up needed to hit that target is calculated.
3. The top-up sits inside the pre-money valuation (standard term sheet structure).
4. Existing shareholders (mostly founders) absorb the dilution from the top-up; the new investor doesn't.

The math example:

Pre-money $20M, post-money $25M (raising $5M), existing pool at 5%, target post-money pool 15%.

• Pool needs to grow from 5% to 15% of post-money = 10 percentage points of new pool.
• That 10% comes out of pre-money, not the new round.
• Founder effective pre-money valuation drops from $20M (gross) to roughly $17M (net of pool top-up).
• The founder gave up ~3 effective percentage points to fund the pool, equivalent to giving the investor a lower price without seeing it on the term sheet.

What founders can negotiate:

• Pool size as a function of hiring plan, not a generic percentage. Build a role-by-role plan for the next 18 months, attach equity grant ranges to each role (CTO 1-2%, engineering hire 0.1-0.3%, VP Sales 0.5-1%, etc.), and present the resulting pool size. Pushing from "investor's 15% default" to "our 11% hiring-plan-justified" is straightforward dilution savings.
• Post-money vs pre-money placement: rare but occasionally negotiated. Putting the pool top-up post-money means the new investor absorbs their share. Usually requires significant founder leverage.
• Phased refresh: some companies negotiate a smaller initial refresh with a board-approved expansion later, rather than a full refresh upfront. Reduces immediate dilution if hiring plan timelines slip.

When refreshes happen and how they compound:

Pool refreshes at every priced round. A typical company that started at 10% pool and topped up at seed (15%), Series A (15%), Series B (12%), and Series C (10%) has cumulatively absorbed roughly 25-30 percentage points of pool-related dilution over the company's life. Most of that came from founders. Modeling forward is the only way to see the lifetime cost; modeling round-by-round under-counts it.

What founders get wrong (specific failure mode): Accepting "industry standard 15% post-money pool" at Series A without modeling. Founder is at 50% pre-A; investor's term sheet specifies 15% post-money pool, current pool at 5%. The 10% pool top-up sits in pre-money, so the founder's effective pre-money valuation drops by the pool dilution, pulling founder ownership from ~38% post-A (no pool refresh) to ~32% post-A (with the refresh). That 6-percentage-point difference is irreversible. The right discipline: model the dilution before signing; build a hiring plan that justifies a smaller pool; negotiate the pool size as the line item it actually is.

The option-pool family (which entry to read for which question)

Option pool is the parent concept; two related entries cover the mechanics that come after the initial pool is created:

• Option Pool Refresh: the periodic top-up that happens at most priced rounds, and the dilution math founders should model upfront.
• Option Pool Shuffle: the negotiation move (sometimes called the "pre-money shuffle") where investors push pool expansion into the pre-money so existing shareholders absorb the dilution, not the incoming round.

Related: Option Pool Refresh · Option Pool Shuffle · Dilution · Vesting · Cap Table · Pre-money vs Post-money Valuation · Equity Incentive Plan

FAQ

How big is a typical option pool?
10-20% of fully diluted shares at the close of a priced round, sized to the company's planned hiring over the next 12-24 months. Pre-seed/seed pools tend to be 10-15%; Series A pools top up to 15-20%; later-stage pools refresh smaller (10-15%). 2025 medians per Carta and PitchBook.

Who absorbs the dilution from creating or refreshing the option pool?
In a standard term sheet, the option pool sits inside the pre-money valuation, so existing shareholders (mostly founders) absorb the dilution rather than the new investor. The negotiation around this is sometimes called the "pre-money shuffle", see Option Pool Shuffle.

Can a founder negotiate the option pool size?
Yes. The leverage is a real, role-by-role hiring plan that justifies a smaller pool. Investors default to a generic percentage (typically 15%); a specific, defensible number based on actual hiring (11-12% is common when modeled) is the way to push the pool down. Saves multiple percentage points of dilution.

What's the lifetime cost of pool refreshes?
A typical company that refreshes pools at seed (15%), Series A (15%), Series B (12%), and Series C (10%) cumulatively absorbs ~25-30 percentage points of pool-related dilution over its life, mostly from founders. Modeling forward is the only way to see the lifetime cost.