Distinguishing investor shares from option pool impact
A funding round usually combines two sources of dilution: the new investor's shares, and any option pool top-up agreed as part of the deal. It helps to calculate each separately, since they affect shareholders differently depending on whether the pool is structured pre-money or post-money, using the same framework as pool dilution and the underlying share dilution formula.
| Shareholder | Before round | After investor shares only | After investor and pool |
|---|---|---|---|
| Founders | 100% | 80% | 70% |
| Pool | 0% | 0% | 10% |
| Investor | 0% | 20% | 20% |
Reservation impact on founder ownership percentages
Suppose a company has 9,000,000 fully diluted shares, all founder owned, and no funding round is happening, but the board decides to reserve a new 10% pool. To make the pool exactly 10% of the new fully diluted total, you solve for pool shares P such that P divided by (9,000,000 + P) equals 0.10, giving P equals 1,000,000. Founders' percentage falls from 100% to 9,000,000 divided by 10,000,000, which is 90%, purely from the pool reservation, illustrating the same choice covered in pre-money vs post-money pool.
Hiring plan alignment to minimize reservation costs
- Size the pool to a real hiring plan, as detailed on the option pool size page, rather than a round default.
- Reuse unallocated shares from an existing pool before agreeing to a fresh top-up.
- Negotiate for pool top-ups to be shared post-money with the investor where possible.
- Revisit pool size at each round rather than over-provisioning years of hiring in one go.
Questions on isolating pool driven dilution
- Is option pool dilution the same as investor dilution?
- No. They are separate components of total round dilution and can be structured differently, particularly around whether the pool sits pre-money or post-money.
- Does an unused pool still count as dilution?
- Yes, for fully diluted ownership calculations, since the shares are reserved even if not yet granted to anyone.
- Can the pool be reduced later to undo dilution?
- Technically the reservation can be reduced if unused, restoring fully diluted percentages, though this is uncommon once a pool has been agreed with investors.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.