Deal Terms
Option Pool
A block of shares reserved for future employee equity grants, typically 10-20% of the fully diluted cap table.
An option pool (or ESOP — Employee Stock Option Pool) is a reserved block of shares set aside for grants to employees, advisors, and contractors. VC term sheets almost always require creating or expanding the option pool before the investment closes — and critically, this is done pre-money, meaning it dilutes founders before the VC calculates their ownership. Option pool shuffle: if the VC requires a 15% option pool pre-money and you only have 10%, you must issue an additional 5% from existing shares (primarily founders), effectively reducing the pre-money value of their stake. Founders should negotiate the option pool to be only as large as genuinely needed for 18-24 months of hiring — no larger.