What the option pool shuffle is
The option pool shuffle happens when the company increases the option pool before the investment and counts the pool in the pre-money. Practically, this means existing shareholders fund the pool increase via dilution.
Why investors ask for it
- They want enough equity reserved to hire after the round.
- They want the pool increase to be reflected in the pre-money, not to dilute the new investors.
How to model it (simplified)
- Start with current option pool % (fully diluted pre).
- Choose a target option pool % post-money.
- Solve for the additional pool needed, then compute the post-money split (existing vs investor vs pool).
Negotiation levers
- Negotiate the target post-money pool size based on hiring plans.
- Ask to split the pool increase between existing holders and new investors.
- Use a cap table model to compare effective dilution across term sheets.
Modeling checklist
- Include SAFE/note conversions in the pre-money fully diluted count.
- Confirm whether the option pool is pre-money or post-money.
- Check that all ownership percentages sum to 100% post-money.
Common mistakes
- Using pool % defined on an inconsistent basis across versions of the cap table.
- Forgetting other dilutive instruments (SAFEs/notes) when estimating founder dilution.
- Chasing a headline valuation instead of negotiating the full dilution package.