Option Pool
Definition
Option Pool: An option pool is a portion of company shares reserved for future employee equity grants. Investors typically require a 10-20% option pool before investment. The pool dilutes existing shareholders but is necessary to attract and retain talent.
Example Usage
“We expanded our option pool to 15% before the Series A to have enough equity for key hires.”
Common Misconceptions
Related Terms
Stock Options
Stock options give employees the right to purchase company shares at a fixed price (strike price) after vesting. Options are a common form of equity c...
Dilution
Dilution occurs when a company issues new shares, reducing existing shareholders' ownership percentage. In each funding round, founders and early inve...
Cap Table
A capitalization table (cap table) is a spreadsheet or database showing the equity ownership of a company, including shares held by founders, employee...
Term Sheet
A term sheet is a non-binding document outlining the key terms of a proposed investment, including valuation, investment amount, board composition, li...
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