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The Option Pool Shuffle

Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valuation. Thanks! Am I correct?

Sizing Option Pools In Connection With Financings

A VC : Venture Capital and Technology

Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. This post is about how to size the option pool. And the investors want the option pool to be in the pre-money valuation. Hopefully it will explain the issue.

Option Pools and VC Negotiations

Rob Go

In my last post about raising seed vs. jumping straight to A, I received a good comment from Chris Woods that my analysis neglected to include the impact of option pools that are created at each financing round. Essentially, the new investor wants there to be a certain % of options available to employees after they invest.

Introducing the Cap Table and Hiring the CTO

Feld Thoughts

As first time entrepreneurs they did not create an employee options pool; we’ll fix that in a little while. They come up with two options: Hire Praveena as an employee and offer her stock options. If the full pool were to be given out, the dilution is fairly significant to the founders.

How to Raise Investor Funding for Your Startup

Early Growth Financial Services

Option Pool — An important piece of your hiring and compensation … Continue reading → Videos Nicolas L.

Model Cap Tables With VCHub

Ask The VC

The LearnVC site has a bunch of other interactive examples for some of the basics of venture financing including: Option Pool Creation. A few days ago I answered a question on AsktheVC about modeling cap tables. After a quick email conversation with Jeff Boardman (founder of LearnVC ), I realize I had left his product off the list.

Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

When I went to raise money in 2006 I thought I knew every term in a term sheet but somehow I still got a bit duped by the option pool shuffle.

Raising Capital: 4 Things You Must Do

Fresh Inc.: The Staff Blog

Don''t spend all of your energy negotiating valuation when you could be talking about the options pool. Here are his tips: 1.

Why offering employee equity is crucial for your startup

The Next Web

In one instance, I told a CEO that we typically recommend a 15 percent stock options pool at seed/Series A stage.

Wenger: Presenting Option Grants to Boards

Ask The VC

Today’s VC post of the day is from Albert Wenger (USV) and titled Presenting Option Grants to Boards. While there is no standard for how to present option grants, Albert lays out a very clear set of eight pieces of data he likes to see. The next two are footnotes for options grants that aren’t standard.

What’s In A Term Sheet?

Early Growth Financial Services

It could be the size of the option pool, or maybe the provisions around reverse vesting. You came, you pitched, you conquered. Congratulations! But do you know what to do once you’re asked to sign a term sheet? Let me say that first, you should have already retained a good startup lawyer. Most investors will expect this.

What is an effective “pre-incorporation-agreement” between possible founders of a startup?


Then sit down with your co-founders and divvy up the equity based on the contributions you all believe each of you will make…providing for reverse vesting, a large option pool, and a clear decision-making structure. My suggestion? Good luck! original post can be found on Quora @ : [link] *.

Comparing valuations between rounds

The Equity Kicker

We’ve just been writing an update for investors about the progress our partner companies have been making. Venice Project

How to Divide Founder Equity: 4 Criteria to Discuss

View from Seed

Below, Lee Hower offers advice for approaching these equity discussions objectively and properly. Experience/Seniority/Role. Ideation/IP.

Equity 108

Quick Post on Post-Money Valuations

Rob Go

When I first started out as a VC nearly 9 years ago, most early stage company valuations were expressed as pre-money valuations.

Should I Use My Investor’s Lawyer?

Scott Edward Walker

Angel Issues VC Issues anti-dilution provisions convertible note drag-along rights exploding term sheets investor lawyer liquidation preference New York option pool protective provisions redemption rights Series A term sheet series seed silicon valley startup lawyerAny advice would be appreciated. At what valuation and on what terms?

Doing Deals – 3 Tips for Entrepreneurs (Part 2)

Scott Edward Walker

Dealmaking Generally cap corporate lawyer doing deals entrepreneurs liablility liquidation preference option pool private equityIntroduction I’ve been doing deals as a corporate lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs make over and over again. Tip #2: Don’t Blink First.

Standart termsheets

The Equity Kicker

The thing with standard termsheets is that they go straight to the position where you would normally expect to end up after negotiation.

Equity for Early Employees in Early Stage Startups


I was asked by a reader how much equity he should give out to early employees and to service providers in a very early stage startup. million. Not bad.

Punch & Pie: How Should Co-Founders Divide Equity?

Agile VC

I like to say that “there are only co-founders” — it’s extraordinarily rare for a successful business to have just a sole founder.

Entrepreneurs: Your instincts are always better than bad advice

The Next Web

Neil Rimer is a Partner and co-founder of Index Ventures. Alarm bells. For any founder, this type of structure should ring all kinds of alarm bells.

What do investors consider the most important aspect of a potential deal?


Valuation, Size of Raise, Amount of Investment, Form of Investment, Liquidation Waterfall, Option Pool, Board Composition, Anti-Dilution Rights, Protective Provisions, Founder Vesting, *original post can be found on Quora @ : [link] *. Characteristics of the Entrepreneur. Characteristics of the Venture. Characteristics of the Market.

Term Sheet Negotiation Tells

Permanent Record

The investor who spends hours browbeating you to avoid a tiny reduction in the option pool will also be tying up board meetings for an hour to talk about an assumption on line 18 of the revenue model submitted for discussion. I recently negotiated and signed a term sheet with a company I am very excited about working with.

Viva La Revolucion! AngelList goes into Hyperdrive

Fred Destin

Some VentureHacks posts are today mentioned like religious scriptures by entrepreneurs, such as Nivi''s 2007 Option Pool Shuffle.

How to Evaluate an Offer from a Startup Incubator

The Startup Lawyer

Other incubators may want to set up an option pool. If so, the startup’s founders need to know this option pool lowers your pre-money valuation. Great news — your startup just got accepted to an incubator! Pre-money valuations startups receive from incubators are typically low…really low. Conclusion.

Is it Time for You to Earn or to Learn?

Both Sides of the Table

Now … these are stock options and not restricted stock so you’ll likely be taxed at a long-term capital gains rate. 125,000.

What to expect before accepting the offer to become Engineer #1 at a startup

The Next Web

In exchange, the engineer is likely offered the promise that his or her option shares will one day turn into big money. Engineer #1?

Y Combinator's Sam Altman to Founders: You Get Too Much Equity

Fresh Inc.: The Staff Blog

This is silliness, he says, because boards can increase option pools whenever they want. After four years, all of it is generally vested.

10 Steps to Success With Angel Investors

Business Plan Blog

10 Steps to Success With Angel Investors. Your chances of success are likely to reduce the more you stray from the 10 guidelines discussed below.

Raising Funding From Family and Friends: Division of Equity

Business Plan Blog

You have looked at the advantages and disadvantages, and have decided it is the best option for your startup. Stage 1: Idea. You need funding.

Venture Deals: Chapter 7: The Capitalization Table

Ask The VC

If you get confused about how much you might own after the pre-money, post-money math and option pool (issued and unissued) calculation runs through the cap table, along with being perplexed on how to actually calculate price per share in a complicated financing, this is the chapter for you. Venture Deals book venture deals

The Dilution Concern for Founders

Recent Buzzes - VC Experts, Inc.

This is not chopped liver, but it is a percentage that suffers by comparison to the employee option pool, for example. By Joseph W.

5 Tips for Raising a Venture Round

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. Sponsor. Discuss.

The Problem with Collecting Logos at Startups

Both Sides of the Table

Collecting logos. It seems to be all the fad in the startup and VC world these days. As a result they end up taking money from many firms all at once.

When The VC Asks: About Your Hiring Plan

Hunter Walker

For an investor this can be a red flag unless you have proven experience building up high quality team quickly or clear access to large talent pools that will want to work with you for some reason (the tech is so cool; you’ve got brand heat; etc). Building a senior team but pushing back on having a healthy employee option pool?

No, You CAN’T retire rich at 30 if you sell your startup

Tony Wright dot com

Before I get into the details for founders, let me talk about options-hungry employees. Full stop. Do it because you love small teams. Congrats!

CMO CTO COO Equity and Compensation


Quick & Dirty How-To: Employee Stock Option AllocationsSeed Stage Compensation What are typical compensation numbers?

Quick & Dirty How-To: Employee Stock Option Allocations

For a company that has raised a first institutional round of capital, this question is important not only when making competitive job offers, but also when calculating what size option pool the company will need before raising the next round of capital. Most option grants are near the bottom of the ranges. CEO 5 - 10. COO 2 - 5.

Exit Math


Employee Stock Option Pool (ESOP) of 15% before funding. Back in February I wrote a post on venture math , explaining how venture fund returns work. While that’s good stuff for you to know, it’s probably far more relevant to know how the math works if and when you sell your own company. Company sells for $ 20M. Common.

Plan On Raising Money? Learn How To Negotiate A Term Sheet!


You should by now know that tomorrow is a big day in Helsinki as Term Sheet Battle will be taking place at Apollo Live Club, starting at 17:30.