Option Pool

The option pool (or ESOP pool) is a block of shares set aside for equity incentives to current and future team members. Investors typically require a pool sized to cover hiring until the next round, often 10–20% on a fully diluted basis.

Timing matters: if the pool is created or expanded pre-money, the dilution falls on existing shareholders (mostly founders) rather than the incoming investor — the so-called option pool shuffle. Negotiating pool size and timing is therefore as important as the headline valuation.