How Big Should Your Option Pool Be? Sizing It From Your Hiring Plan

Work bottom-up. Public rules of thumb vary widely by stage, sector and location, so treat any quoted range as a conversation starter and derive your own number:

1. List the hires you expect to make until the next raise, usually 18 to 24 months out.
2. For each role, write the equity grant you'd offer as a share of fully diluted shares. Senior and early hires get larger grants than later ones.
3. Add the total, then add a cushion for backfills, refresh grants and a hire you haven't planned.
4. Subtract options already granted but unvested that remain in the pool, and any authorized but unissued shares already reserved.
5. Compare the result to what the lead investor proposes, and negotiate from the gap.

Base pay is a useful sanity check. The median US software developer wage was $135,980 in May 2025¹, and offers for a senior engineer at a funded startup are usually a mix of cash and equity, so the equity portion should reflect how much cash you can't pay.

The shuffle refers to the investor requiring the pool to be created or enlarged before the round, so it sits inside the pre-money valuation. A worked example shows the effect.

Say you raise $2,000,000 at an $8,000,000 pre-money valuation, making the post-money $10,000,000, and the investor wants a 10 percent unallocated pool after closing. In this example, the new investor owns 20 percent, the pool owns 10 percent, and existing holders own the remaining 70 percent. In this example, the pool is worth $1,000,000 at the round price, and it comes out of the pre-money, so the effective pre-money valuation for existing holders is $7,000,000, not $8,000,000.

When you compare offers, calculate the effective pre-money after the pool. A term sheet with a higher headline valuation and a bigger pool can be worse for you than a lower valuation with a smaller pool.

The right size changes because the plan changes, not because of a stage label. At seed, the pool has to cover the first key hires, often a handful of people with large grants each. By Series A, you're usually hiring more people across more functions, but each grant is smaller as a share of the company.

Questions to ask at each round:

• Who are the named hires in the next 18 to 24 months, and what grants have you discussed?
• How much of the current pool is granted, and how much is still available?
• Do you expect executives to be hired that need outsized grants?
• Will a refresh program for existing employees be needed?

If the plan is thin, the honest answer is a smaller pool now and a top-up at the next round, and the pool can be expanded later with board and stockholder approval. Compare your cap table to your model using a cap table template so the numbers agree.

Push on the terms that change the real outcome:

• Size after the plan: show your hiring plan and ask for the smaller pool it supports.
• Timing: ask that only the amount needed for the next 12 to 18 months be included in the pre-money.
• Treatment of unused shares: confirm that returned or forfeited options go back into the pool and that unallocated shares are handled clearly in a sale. Ask your lawyer how the charter and plan deal with this.
• Refresh authority: agree who can approve top-ups between rounds.

Cap table software lets you model the same term sheet under different pool sizes, so you can see the dilution to each holder before you sign. Cap table software can usually run this kind of scenario modeling, and the steps to set up grants are in how to issue stock options.

Track grants against the plan every quarter: options granted, vested, exercised, canceled and still available. When a grant is canceled, confirm the shares return to the pool under your plan rules.

Watch the ratio of available pool to planned hires. If you're spending the pool faster than the plan, raise the issue with your board before you make an offer you can't fund. Also review your equity offer letter explanations so candidates understand what the grants are and aren't.