How does option pool size at the time of incorporation impact valuation and funding


1

Suppose someone needs to incorprate a C-corp, for a high tech high growth business.

How does option pool size at the time of incorporation impact valuation and funding. Or it only matters how investors considers option pool at the time of investment?

Single founder, employees may join in couple of months..

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asked Dec 13 '10 at 21:30
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Jewelthief
151 points
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1 Answer


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I recently touched on this subject here. Read up on the links there. You may also want to read Brad Feld's Term Sheet series, especially the Employee Pool post, to learn more about funding and investor terms.

In short, it doesn't. But it impacts your dilution, not the investors. The option pool gets diluted just as any stock down the run when emitting new stock.

One could argue however, that depending on your investors view, future investors views, and your ability to attract great talent with stock, that it has an indirect impact on valuation.

answered Dec 14 '10 at 01:19
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John Sjölander
2,082 points

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