- New shares to reserve
- 111,111
- Total pool shares
- 111,111
- Fully diluted shares
- 1,111,111
- Dilution to existing holders
- 10 %
Sizing a new pool for future employee grants
The pool is usually expressed as a target percentage of the fully diluted share count after the round closes. To hit that target, new option shares must be issued before the round, sized so that after the new investor's shares are also issued, the pool equals the target percentage of the total. This means the pool is carved out of the pre money valuation, so its full cost falls on existing shareholders rather than being shared with the new investor, which is the core mechanic behind option pool sizing.
- Target pool percentage: the size of the pool relative to the fully diluted cap table after the round
- Planned grants: the total percentage the company expects to grant to employees before the next round
- Pre round top up: new option shares issued before the investment closes
Dilution impact of a ten percent pool top up
A company wants a 15 percent option pool in place immediately after a new funding round. Before the round, existing shareholders hold 100 percent of a company valued at 8 million euros pre money, and a new investor plans to invest 2 million euros for shares priced off a 10 million euro post money valuation. To end up with a 15 percent pool after the round, the company issues new option shares before the round closes, sized so that the pool is 15 percent of the total once the investor's new shares are also added. Because this pool is created before the investment, its dilution falls entirely on the founders and other existing shareholders, not on the new investor, a distinction that should be visible on the cap table.
The exact number of new option shares needed depends on solving for the pool percentage after both the pool and the investor's shares are added, which is why this is usually done with a spreadsheet or calculator rather than by hand. See fundraising rounds for the mechanics.
Post money pool sizing and investor requirements
- The calculator assumes the whole pool is created before the round, which is standard but not universal
- It does not account for unused pool shares carried over from a previous round, which should be netted off the new target
- Actual negotiation between founders and investors over pool size and timing can change who bears the dilution
Sizing a pool: what founders want clarified
- Why do investors ask for the pool before their investment?
- This ensures the pool dilutes existing shareholders rather than the new investor, effectively lowering the price founders receive for their shares relative to a headline valuation.
- What is a typical pool size at seed stage?
- Many seed stage companies in Europe target a pool between 10 and 15 percent of the fully diluted cap table, though this varies by sector and hiring plans.
- What happens to unused pool shares later?
- Unused shares typically stay in the pool for future grants or get reduced in size at the next round if the company decides it does not need as large a pool.
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.