Enter your pre-money valuation and investment amount. The pre-money valuation represents your company's worth before new capital, whilst the investment amount indicates how much the investor commits. These figures determine your post-money valuation and investor ownership percentage.

Common Mistake: Confusing pre-money and post-money valuations. Pre-money valuation + Investment = Post-money valuation. If an investor offers "£10M at £2M," that's a £10M post-money valuation with £2M investment, meaning £8M pre-money.

Pro Tip: Typical seed rounds value companies at £2-8M pre-money, whilst Series A rounds range from £8-25M pre-money. Research comparable company valuations in your sector for realistic benchmarks.

Specify your option pool size as a percentage of post-money capitalization. Standard pools range from 10-20%, with seed-stage companies typically allocating 10-15% and Series A companies reserving 15-20%. The calculator lets you model both pre-money and post-money pool creation to compare dilution scenarios.

Common Mistake: Creating pools too small to fund hiring plans. Calculate anticipated hires over 18-24 months and their expected equity grants (typically 0.1-1% per early employee) to size your pool appropriately.

Pro Tip: Negotiate option pool timing aggressively. Pre-money pools dilute founders but not investors, whilst post-money pools dilute everyone proportionally. The difference can shift several percentage points of ownership.

Review the generated cap tables showing ownership before and after funding. Pay attention to dilution percentages for each stakeholder. The calculator highlights high dilution scenarios with warnings, helping you identify potentially problematic deal terms before signing.

Common Mistake: Focusing solely on valuation whilst ignoring dilution. A higher valuation with unfavourable option pool terms may leave you with less ownership than a lower valuation with better terms.

Pro Tip: Use the scenario comparison features to model multiple term sheet options side-by-side. Export results as PDF to share with advisers and board members for informed decision-making.

Option pool dilution occurs when a company creates a reserve of shares (option pool) for employee stock options, reducing existing shareholders' ownership percentages. These shares are authorized but unissued, held in reserve for future employee grants. When employees exercise options, they convert into common shares, but the dilution to existing shareholders happens at pool creation, not upon exercise.

The magnitude of dilution depends on pool size and timing. A 15% option pool created when the company has 10M shares outstanding requires creating 1.76M additional shares, diluting existing holders from 100% to 85% ownership before any employee grants occur.

Pre-money pools are created before investment, diluting only existing shareholders (founders). If founders hold 100% and create a 15% pre-money pool, they immediately dilute to 85%. Then when an investor takes 20%, founders end with 68% (85% × 80%).

Post-money pools are created after investment, diluting both existing shareholders and new investors proportionally. With a 15% post-money pool, everyone dilutes 15%: founders retain 68% (80% × 85%) and the investor holds 17% (20% × 85%) rather than 20%. This 3% difference (20% - 17%) represents the investor "paying" for part of the option pool, making post-money pools more founder-friendly.

Typical option pools range from 10-20% of post-money capitalization, varying by stage and sector. Seed-stage companies often reserve 10-15%, whilst Series A companies may allocate 15-20% to fund 18-24 months of hiring. Technology companies typically maintain larger pools than service businesses due to competition for engineering talent.

Pool sizing should reflect actual hiring plans rather than investor demands. Calculate expected grants per role: VPs (0.5-1.5%), Directors (0.25-0.75%), Senior ICs (0.1-0.5%), Junior roles (0.01-0.1%). Sum grants for planned hires over 18-24 months, add 20% buffer, and negotiate that number rather than accepting arbitrary percentages.

Calculate ownership through multiple rounds by applying each round's dilution sequentially. If you start with 80% post-seed and Series A investors take 25% whilst creating a 5% option pool top-up (total 30% dilution), you retain 80% × (1 - 0.30) = 56%. In Series B, if investors take 20% and pool is refreshed 3%, you keep 56% × (1 - 0.23) = 43.1%.

The compounding effect of dilution means founders starting with 100% typically end with 15-30% ownership post-exit after 3-4 funding rounds. Plan dilution budgets across anticipated rounds, understanding that maintaining >50% ownership through Series B is rare unless you're highly capital-efficient or bootstrapped early.

Not necessarily. Higher valuations with larger pools or pre-money pool treatment often leave founders with less ownership than lower valuations with better terms. For example: £10M valuation, 20% pre-money pool, 25% investor stake leaves founders with 60% ((100% - 20%) × (100% - 25%)). Meanwhile, £8M valuation, 15% post-money pool, 20% investor stake yields 68% ((100% - 20%) × (100% - 15%))—8% more ownership despite lower valuation.

Calculate absolute ownership percentages across scenarios rather than focusing on headline valuations. Your ultimate exit proceeds depend on ownership percentage × company value at exit. Optimizing current valuation at the expense of ownership may reduce total returns if the company succeeds.

Unused option pool shares remain authorized but unissued, effectively "returning" ownership to shareholders proportionally through reduced dilution in future rounds. If you create a 15% pool but only grant 8%, the unused 7% reduces dilution in the next funding round since those shares already exist in the cap table.

However, unused pools don't directly increase founder ownership—they merely mean the dilution already occurred without employee grants being made. This underscores the importance of sizing pools accurately to hiring plans, avoiding excess dilution from "just in case" oversized pools that never get fully utilized.

Option pools don't change company valuation directly—they change the share count used to calculate price per share, which determines how much ownership investors receive for their investment. With a £10M pre-money valuation and 10M shares, the price per share is £1. Creating a 15% pre-money pool adds 1.76M shares, reducing price per share to £0.85 (£10M ÷ 11.76M shares).

This matters because investors often quote "pre-money valuations" assuming option pools are already created (called "pre-money post-pool"). If you quote £10M pre-money thinking that's pre-pool and the investor assumes post-pool, you've effectively agreed to a £8.5M valuation—a significant difference. Always clarify whether quoted valuations are pre-pool or post-pool during negotiations.

Refresh pools when remaining unallocated options fall below 6 months of anticipated grants or when pools drop below 5% of capitalization, whichever comes first. Running out of options mid-way between funding rounds forces emergency board approvals and potential shareholder dilution at inopportune times.

Plan refreshes during funding rounds when investor capital offsets dilution impact and new investors expect pool sizing appropriate to growth plans. Refreshing between rounds dilutes existing shareholders without capital infusion—a harder sell to current investors. Structure hiring plans to align pool exhaustion with fundraising timing when possible.

Absolutely. Option pool size and timing are negotiable terms, especially when you have leverage from multiple offers or strong metrics. Present detailed hiring plans showing required grants per role over 18-24 months. Justify pool sizes with data rather than accepting investor requests at face value.

Key negotiation points: (1) Push for post-money pools rather than pre-money, (2) Size pools to realistic hiring plans, not arbitrary percentages, (3) Request pool reductions if investors modify hiring requirements, (4) Clarify whether quoted valuations are pre-pool or post-pool. Document all assumptions in term sheets to avoid confusion during closing.

Convertible notes complicate option pool calculations because note holders receive shares at conversion, creating additional dilution. When notes convert at the next priced round, calculate dilution including note conversion shares before determining option pool sizing. If you have £500K in notes with 20% discount converting into a £5M round, note holders receive shares worth £625K (£500K ÷ 0.80), consuming 12.5% of the post-money round.

Model pool creation after note conversion to understand true dilution. Some investors attempt to size pools pre-conversion, effectively forcing founders to dilute twice—once for note conversion, once for the pool. Insist on pool calculations using post-conversion share counts to ensure fair treatment.