Raising money · A term for founders abroad
What is an option pool?
Shares a corporation sets aside, often 10% to 15%, for future employees' and advisers' stock options, granted under a plan the board adopts.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 72 of 105 in the glossary, filed under O.Every term, A to Z
Option pool, for a founder abroad.
An option gives the holder the right to buy shares later at a fixed price. A startup sets aside part of its fully diluted equity for them, usually before its first priced round, under a stock option plan its board adopts. Options vest like founders' stock.
Investors usually ask for the pool to be created or topped up before their money comes in, so it dilutes the founders rather than them. Knowing that helps you negotiate its size.
Read next · guide · 4 minCap table basics for founders abroad: shares, vesting, the option pool and dilutionWhat founders ask next.
- How big should an option pool be?
- Often 10% to 15% before a seed or Series A round, sized to the hires planned before the next one.
03 · See also
- Raising moneyCap tableThe record of who owns what share of a company, including options, SAFEs and other convertible instruments; investors read it first.Read the term
- Raising moneyVestingEarning stock over time: unvested shares can be bought back at cost if the holder leaves; four years with a one-year cliff is the norm.Read the term
- Raising moneyAuthorised sharesThe most shares a corporation may issue, set in its certificate of incorporation; ten million is common for a startup.Read the term
- Raising money83(b) electionA founder's choice to be taxed on restricted stock when it's granted rather than as it vests, filed with the IRS within 30 days, with no extension.Read the term
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