Definition
An option pool is a reserve of equity (typically employee stock options) set aside for hiring and incentives. Option pools dilute existing shareholders on a fully diluted basis.
How to use it
- Option pools are often increased during fundraising; the timing determines who bears dilution.
- Always define the pool as a percent of fully diluted shares (not just issued shares).
Common mistakes
- Confusing granted options with the full pool reserve.
- Modeling pool % on the wrong basis (issued vs fully diluted).
Measured as
Measure Option Pool with the same date, unit basis, and accounting or policy definitions used in the rest of your model.
Misused when
- Confusing granted options with the full pool reserve.
- Modeling pool % on the wrong basis (issued vs fully diluted).
Operator takeaway
- Option pools are often increased during fundraising; the timing determines who bears dilution.
- Always define the pool as a percent of fully diluted shares (not just issued shares).
- Tie Option Pool to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Quantify the impact with Option Pool Shuffle Calculator if you need to turn the definition into an operating assumption.
- Read Option pool shuffle: how it impacts founder dilution (with example) if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- Option Pool Shuffle Calculator: Estimate founder dilution impact when the option pool is increased to a target percent of post-money (simplified).
Guides
- Option pool shuffle: how it impacts founder dilution (with example): Understand the option pool shuffle, why it's negotiated, and how a post-money option pool target changes dilution for existing holders.
- Pre-money vs post-money valuation: formulas, ownership, and pitfalls: Learn pre-money vs post-money valuation, how investor ownership is estimated, and why the option pool shuffle changes effective dilution.
- Fundraising & valuation hub: pre/post-money, SAFEs, notes, and liquidation prefs: A practical hub for startup fundraising and valuation basics: pre/post-money, pro rata, option pool shuffle, SAFE/note conversion, and liquidation preference outcomes.