Sizing an option pool

The option pool is reserved common stock for employees, advisors and sometimes consultants. Do not pick 15% because "that is what Series A wants" and stop thinking. Build a hiring plan for 12–24 months, assign grant sizes, sum them, and add a buffer.

Employees receive options to buy common at a strike set by a 409A. The pool is the inventory those grants draw from.

The big idea

A pantry you stock from a shopping list, not from a round number on a billboard. The analogy breaks at the priced round: investors may still demand 10–15% post-money pool because they underwrite their 18-month plan. Your job is to negotiate with a spreadsheet.

Index Ventures' Rewarding Talent / OptionPlan benchmarks (widely cited; figures evolve, treat as order-of-magnitude) for US seed-stage individual contributors:

At Series A, individual grants compress. Index's rule of thumb for VP-level ownership is often 0.3–0.8% FD at Series A and 0.2–0.7% at Series B, with product/engineering at the high end. Non-founder C-level is often ~0.8–1.5% FD at Series A in their materials — expensive enough to plan explicitly.

Orders of magnitude by stage (US venture-backed; check current surveys):

Percentages fall as FD share count and valuation rise; dollar value of the grant can still rise.

Walking through an 18-month seed plan

Next 18 months: 1 senior eng (1.0%), 2 mid eng (0.45% each), 1 mid product (0.45%), 1 junior eng (0.15%), 1 advisor (0.25%).

1.00 + 0.45 + 0.45 + 0.45 + 0.15 + 0.25 = 2.75%
Add ~50% buffer: 2.75% × 1.5 ≈ 4.1%

If you already have 3% available, you need roughly 1% more reserved — not a blind jump to 15%.

As of the mid-2020s, seed/Series A post-money pools commonly land around 10–15% in US venture deals, with European averages often a bit lower historically in Index's commentary. Market cycles move this; the hiring-plan method stays valid.

Advisors: often 0.1–0.25% for a real operating advisor at seed, vesting 1–2 years with a short cliff. Put hours and intros in an advisor agreement. Endless 0.5% grants to people who take one call a quarter are how pools die. Contractors sometimes receive NSOs; many companies later prefer cash.

Common mistakes

• Agreeing to 15% with no roster. Rebuild the post-close table first.
• Paying advisors like co-founders. Pool math and culture both suffer.
• Promising % without knowing FD. Candidates hear "1%" calculated on outstanding-only.
• Forgetting ISO $100k limits on large grants. Excess becomes NSO; tell the employee — see equity taxes.

Check yourself

Seed plan sums to 2.75% of FD. With a 50% buffer and 3% already available, how much extra do you need?

About 1% — 2.75% × 1.5 ≈ 4.1%, minus 3% on hand.

Why do percentages for the same role fall from seed to Series B?

The fully diluted denominator and valuation grew; dollar value of the grant can still rise.

Key takeaways

• Size from a hiring plan plus buffer, not a slogan percentage.
• Available vs outstanding both sit in fully diluted ownership.
• Index OptionPlan-style benchmarks beat guesswork for grant sizing.
• Unused pool is prepaid founder dilution waiting for names.

Further learning

Index Ventures OptionPlanEntrepreneurs know how important stock options are for hiring and retaining the best talent.Index Ventures

The Holloway Guide to Equity CompensationStock options, RSUs, job offers, and taxes—a detailed reference, including hundreds of resources, explained from the ground up, for both employees and managers.Holloway

Next: the option pool shuffle.