Option Pool

An Option Pool is a reserved portion of a company’s shares set aside for future issuance to employees, advisors, and board members as part of stock-based compensation plans. Especially common in startups and early-stage businesses, option pools help attract and retain talent by offering potential equity ownership.

Option pools typically dilute existing shareholders when created or increased, which is often negotiated during funding rounds. Venture capital investors often require an adequate option pool as part of investment terms to ensure future employee incentives are accounted for.