Option pool
An option pool is a block of shares reserved for future employees, sitting on the cap table before a single option has been granted. It is in the fully diluted count from the day it is created.
Two things happen to a pool: options get granted out of it, and the pool itself gets enlarged. They look similar on a cap table and they do different things to your percentage.
Reserved, and held by no one
| Holder | Shares | Ownership |
|---|---|---|
| Founders | 8,100,000 | 90.0% |
| Option pool, reserved, none granted | 900,000 | 10.0% |
| Total | 9,000,000 | 100.0% |
The founders are at 90.0%, not 100%, and the missing ten points are held by no one. They are reserved for people who have not been hired.
Granting from the pool
Hire four people and grant them 450,000 options between them, half the pool.
| Holder | Shares | Ownership |
|---|---|---|
| Founders | 8,100,000 | 90.0% |
| Granted options | 450,000 | 5.0% |
| Pool, still unissued | 450,000 | 5.0% |
| Total | 9,000,000 | 100.0% |
The founders are still at 90.0%, exactly.
No shares were created. They moved from one row of the cap table to another, and the denominator did not change, because the pool was already in it. The dilution was taken when the pool was created, not when the options were handed out.
Enlarging the pool
Now take the same starting cap table and add 1,000,000 shares to the pool.
| Holder | Shares | Before | After |
|---|---|---|---|
| Founders | 8,100,000 | 90.0% | 81.0% |
| Option pool | 900,000 → 1,900,000 | 10.0% | 19.0% |
| Total | 9,000,000 → 10,000,000 | 100.0% | 100.0% |
The founders lost 9.0 points and no money came in.
That 9.0 is a fact about these numbers, not a rule. It is what a 1,000,000-share top-up does to a 9,000,000-share count. A smaller top-up, or the same top-up on a larger base, produces a different answer. What carries across is the direction: granting from an existing pool leaves the founders' percentage where it was, and enlarging the pool moves it.
Where the second one matters most is inside a financing round. If the top-up is taken out of the pre-money, it enlarges the denominator before the incoming investor's percentage is calculated, which means the existing holders absorb it and the new investor does not. That arrangement has its own page and its own arithmetic.
What to check in your own documents
- Know your pool's two numbers, reserved and granted. Only the reserved figure is in your denominator today.
- If a round proposes a pool top-up, ask whether it comes out of the pre-money or the post-money. The two allocate the cost to different people.
- Size the pool against a hiring plan you can name. A pool is paid for in ownership from the day it is created, whether or not anyone is hired into it.
- Check how much room the existing pool still has. If it covers the plan, a top-up is a request rather than a requirement.
Run it on your own numbers
Pool arithmetic is straightforward on its own. It stops being straightforward when a top-up lands in the same round as a SAFE stack and a priced valuation, because the order the changes are applied in changes the answer.
Promythia treats the pool top-up as its own driver, so you can see what it did on its own. Create a free account and enter your real pool.
Promythia offers market and strategy guidance. It is not legal or financial advice.