How does an option pool work?

An option pool consists of shares of stock reserved for employees of a private company. The option pool is a way of attracting talented employees to a startup company—if the employees help the company do well enough to go public, they will be compensated with stock.

How is option pool calculated?

The option pool is generally calculated out of the pre-money shares, because investors want to be able to simply calculate their post-money percentage ownership. … Now that the investment is complete, the option pool shares that were issued at pre-money equal 15%.

Is a higher or lower option pool better?

Try not to reserve more than you plan to issue.

Remember: the bigger your initial pool, the more dilution you personally take on (instead of sharing the dilution with other owners). Investors prefer larger option pools because that usually means your option pool will last longer, potentially reducing their dilution.

How much should I set aside for option pool?

How big should my option pool be? The standard advice is to set aside 10% of your total shares into an option pool.

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How big should your options pool be?

A typical size for the option pool is 20% of the stock of the company, but, especially for earlier stage companies, the option pool can be 10%, 15%, or other sizes. Once the pool is established, the company’s board of directors grants stock from the pool to employees as they join the company.

Does an options pool dilute?

The initial size of the option pool may decrease with subsequent rounds of funding because of investors’ ownership demands. The creation of an option pool will commonly dilute the founders’ share in the company because investors (angels and venture capitalists) often insist on it.

How is an ESOP pool created?

To offer ESOPs, founders are required to dilute a part of their equity and carve the ESOP pool. From this pool, ESOPs or equity options are granted to employees. If the pool gets exhausted, founders and investors may dilute further equity to replenish the pool in successive fundraising rounds.

Which type of inground pool is best?

Concrete pools tend to be the strongest of all the inground swimming pools. Since they are rebar and concrete they can’t oxidize or corrode. Like every other form of concrete, they get stronger as time passes.

How do I increase my options pool?

It increases the pool by allocating shares from the company’s authorized stock. When the company adds more shares to the option pool, it dilutes all the existing stockholders (when using the fully diluted ownership calculation).

What is an option pool VC?

In most cases an option pool is set up when a venture capital investor participates in a company. It is usually a requirement of the investor based on a strong belief that the company’s employees will work harder and be stronger committed if they share in the profits of a future exit.

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How much equity should a founder keep?

As a rule, independent startup advisors get up to 5% of shares (or no equity at all). Investors claim 20-30% of startup shares, while founders should have over 60% in total.

What happens to remaining option pool in acquisition?

In most cases, the unused shares are redistributed to all shareholders proportionate to their ownership. … Remember: all unused shares in the option pool get REDISTRIBUTED EVENLY to all shareholders. So basically, your extra 1 percent means that the remaining 9 percent will fatten the pockets of your investors.

How does option pool affect valuation?

The option pool lowers your effective valuation.

But let’s create $2M worth of new options, add that to the value of your company, and call their sum your $8M ‘pre-money valuation’.” 60% effective valuation + 20% new options + 20% cash = 100% total.

Who Owns option pool?

Your stock option pool is a collection of stocks reserved for employees of your company. Consisting of 10% – 20% ownership of your company, this pool is typically drawn from founders’ shares. Your stock option pool is a percentage of the value of your company—not a percentage of available shares.

What percent does Ycombinator take?

In practice, this is how it works: YC Batch Investment: We’ll invest $125k in return for 7% of your company using a “post-money” Simple Agreement for Future Equity (the “YC Safe”).

How is option pool post money calculated?

A POST-MONEY VALUATION is the value of a company AFTER an investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity. The Post-money valuation is the sum of the pre-money valuation and the money raised in a given round.

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