Introducing Raziel: every alternative asset in one place. Explore the platform

Raziel home
Get Started Free

Option Pool Calculator

See how a term sheet’s option pool requirement changes your effective pre-money valuation, your price per share and founder ownership.

Inputs

Reset

Term sheet

Unissued pool as a percent of the post-money, as the term sheet states it.

Company today

Of fully diluted shares

Of fully diluted shares

Optional, for price per share. 0 to skip.

Results

Effective pre-money valuation

Pool shuffle

$17,250,000

$2.7M of the $20M headline pre-money pays for new option pool shares (13.7% of it).

Founders after the round
47.89%
56.00% with no new pool
Founder cost of the pool
8.11 pts
Founder ownership the top-up costs
New pool shares
11.00%
Of post-money, worth $2.7M
Round price per share
$1.7250
Headline $2.0000
Pool shares added
1,594,203
Of 14,492,754 post-money shares
Founders with a post-money pool
49.58%
If the pool were added after the round
Ownership after the round

Plan rounds in Raziel

Keep your cap table, option pool and investor updates in one place before the next round.

Start free

The math

How the pool shuffle works

The headline pre-money valuation is not the whole story. When the new option pool is carved out of the pre-money, existing holders pay for it.

  1. The investors’ stake is fixed. They own the raise divided by the post-money, no matter how big the pool gets.
  2. The pool is topped up to the target. The existing unissued pool shrinks with the round, so only the shortfall is added as new shares.
  3. Existing holders absorb it. The new shares sit in the pre-money count, so the round price drops and the value of the existing shares (the effective pre-money) is the headline minus the new pool.
New investor stake   = raise / (pre-money + raise)
Old pool after round = existing pool x (1 - investor stake)
Pool top-up          = target - old pool after round
Effective pre-money  = pre-money - top-up x post-money
Round price          = effective pre-money / shares today

Assumptions and simplifications

  • One priced round with no SAFEs or notes converting. The SAFE conversion calculator handles those.
  • Founders and other existing holders are diluted pro rata; “other existing holders” is everything that is not founders or the unissued pool.
  • The post-money pool comparison adds the same final pool after the round, diluting everyone including the new investors.

Worked example

$5M on a $20M pre-money with a 15% pool target

New investor stake
$5M / $25M = 20.0%
Existing 5% pool after the round
5% x 80% = 4.0%
Pool top-up
15% - 4% = 11.0% of post-money
Value of the top-up
11.0% x $25M = $2,750,000
Round price
$17,250,000 / 10,000,000 = $1.7250
Founders after the round
70% / 95% x 65% = 47.89%
Effective pre-money$17,250,000

Further reading

Frequently Asked Questions

Common questions about the Option Pool calculator and the math behind it.

What is the option pool shuffle?

Term sheets often require the company to grow its option pool to a target percent of the post-money, with the new pool shares counted in the pre-money. The new investors still own exactly the raise divided by the post-money, so the whole cost of the new pool falls on existing holders. The headline pre-money stays the same, but the value of the shares existing holders own before the round is lower.

What is the effective pre-money valuation?

The headline pre-money minus the value of the new pool shares at the round price. It is what the company’s existing shares are actually being valued at, and it equals the round price per share times the shares outstanding before the round.

How big should the option pool be?

Big enough to cover the hires the company plans to make before the next round, and no bigger, since unused pool shares created in the pre-money dilute founders for nothing. A hiring plan with expected grant sizes is the usual way to size it.

Can founders negotiate the pool into the post-money?

Sometimes. If the pool is added after the round, new investors share the dilution in proportion to their stake. The calculator shows founder ownership both ways so you can see what the difference is worth.

Does the existing pool count toward the target?

Yes. Unissued options already in the pool count, diluted by the round, so only the shortfall is added. If the existing pool already meets the target, nothing is added and the effective pre-money equals the headline.

Related tools

More free calculators

All tools