The option-pool shuffle: who really pays for the new pool

"We'll need a 10% option pool post-close" sounds like a hiring plan. It's also a pricing move. When the pool top-up is created in the pre-money — the standard ask — founders and converting SAFEs pay for the entire pool, while the new investor's percentage is untouched. Here's the shuffle, with the exact points and price change.

What "the shuffle" is

A lead usually wants a target option pool (say 10%) to exist after the round closes. The question is who funds it. If the new shares are added to the pre-money cap table, they lower the price per share, so the same pre-money valuation now buys the founder a smaller slice — the pool comes out of the existing holders. If they were added post-money, the new investor would share the cost. Almost every term sheet puts it in the pre-money. That's the shuffle.

Worked example — the same round, with and without a pool

Base case: 10,000,000 founder shares, one $1,000,000 SAFE at a $10,000,000 cap, a $4,000,000 round at a $16,000,000 pre-money. First with no pool, then with a 10% post-round pool created in the pre-money.

Why the price per share drops

The priced-round price is set so pre-money = price × pre-money fully-diluted shares. Add pool shares to the pre-money side and the share count goes up, so the price has to come down to keep the pre-money valuation fixed. A lower price is exactly why founders and SAFEs get diluted more — their existing shares are each worth less of the pre-money.

What you can actually negotiate

• The size. A 10% pool is a default, not a law. If your hiring plan needs 6%, argue for 6% — every point you shave is a point back to the founders.
• Pre-money vs post-money treatment. Rare to win, but worth naming: a post-money pool shares the cost with the new investor.
• Existing unallocated options count. If you already have unissued pool, the top-up is only the difference to the target — make sure the term sheet credits it.

The point is not that pools are unfair — a company needs equity to hire. The point is that the pool is a real cost to you, denominated in points, and it's negotiable. Walking in knowing "a 10% pre-money pool costs me 10 points and drops my price to $1.24" is a very different conversation than nodding at "standard 10% pool."