Economic impact of overprovisioning shares
The option pool is carved out of the fully diluted share count before a round closes, in most cases. That means the pool dilutes existing shareholders, mainly founders, rather than the incoming investor. A pool that is too big transfers value away from founders for no reason. A pool that is too small forces a top-up later, which also dilutes founders again, a cost worth weighing before creating a pool.
Investors often ask for a pool sized to cover roughly 12 to 24 months of planned hiring, expressed as a percentage of the fully diluted company after the round. This keeps enough headroom to make competitive offers without repeatedly resizing the pool at every board meeting, though increasing a pool later remains straightforward if the hiring plan changes.
Bottom up sizing from hiring plans
Start from a hiring plan, not a percentage. List the roles you expect to hire in the period the round is meant to fund, and estimate a typical option grant for each role as a percentage of the company. Sum these grants and add a buffer of 15% to 20% for unplanned hires or larger-than-expected grants to senior people, then check the result against the mechanics described in pool dilution.
| Role | Typical grant range | Number of hires | Subtotal |
|---|---|---|---|
| Senior engineer | 0.10% to 0.30% | 4 | 0.80% |
| Engineering manager | 0.30% to 0.60% | 1 | 0.45% |
| Sales / marketing lead | 0.20% to 0.50% | 1 | 0.35% |
| Individual contributors | 0.03% to 0.10% | 10 | 0.60% |
These ranges are illustrative. Actual grant sizes vary by country, seniority, and how much cash compensation is offered alongside equity.
Sizing a pool from an actual hiring plan
Suppose the sums above total 2.2% and you add a 20% buffer, giving roughly 2.6%. If your existing pool already has 1% unallocated, you only need to add about 1.6% of new pool. Rounding up for negotiation room, a founder might propose a 2% top-up rather than accepting an investor's flat 10% request that has no link to the actual hiring plan.
Always calculate pool size on a fully diluted, post-money basis so you compare like with like when negotiating with investors.
How founders usually size a pool
- Is there a standard option pool size?
- No fixed standard exists. 10% to 15% at seed and a further top-up at Series A are common in Europe, but the right number depends on your specific hiring plan.
- Does a bigger pool always help recruiting?
- Not directly. Candidates care about the number of options and their expected value, not the size of the overall pool. An oversized pool mainly benefits future hires at the expense of current shareholders.
- Should the pool include unallocated shares from a previous round?
- Yes. Any unused shares from an existing pool should be netted off before calculating how much new pool is needed.
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.