Reserved stock option pool

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If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices. Another way to prevent getting this page in the future is to use Privacy Pass. The Inside Man, Three-Card Shuffle Summary: Don’t let your investors determine the size of the option pool for you. Summary: Don’t let your investors determine the size of the option pool for you. Blue Shirt Capital against Herd Mentality Management. Your teammates ask what their shares are worth.

Later that evening you review the term sheet from Blue Shirt. As your lawyer explains that the so-called pre-money valuation always includes a large unallocated option pool for new employees, your stomach sinks. How am I going to explain this to the team? If you don’t keep your eyes on the option pool, your investors will slip it in the pre-money and cost you millions of dollars of effective valuation.

The option pool lowers your effective valuation. The shuffle puts pre-money into your investor’s pocket. Proper respect must go out to the brainiac who invented the option pool shuffle. Putting the option pool in the pre-money benefits the investors in three different ways! First, the option pool only dilutes the common stockholders.

If it came out of the post-money, the option pool would dilute the common and preferred shareholders proportionally. Second, the option pool eats into the pre-money more than it would seem. It seems smaller than it is because it is expressed as a percentage of the post-money even though it is allocated from the pre-money. This reverse dilution benefits all classes of stock proportionally even though the common stock holders paid for all of the initial dilution in the first place!

In other words, when you exit, some of your pre-money valuation goes into the investor’s pocket. More likely, you will raise a Series B before you sell the company. In that case, you and the Series A investors will have to play option pool shuffle against the Series B investors. However, all the unused options that you paid for in the Series A will go into the Series B option pool. This allows your existing investors to avoid playing the game and, once again, avoid dilution at your expense. Solution: Use a hiring plan to size the option pool. You can beat the game by creating the smallest option pool possible.

That should cover us for the next 12-18 months. That should cover us until the next financing. We’ll cover your response in a future hack. Next, make a hiring plan for the next 12 months. Add up the options you need to give to the new hires. How do you create an option pool from a hiring plan?

If that’s the real reason, what is the purpose of adjustment? It was a bargaining chip used in conjunction with a decision to take slightly more money, fREE LAYAWAY ON ALL THE PRODUCTS WE SELL! When subsequent orders are executed — the option pool lowers your effective valuation. To meet additional stock needs for various reasons — so hurry reserved stock stock trading software affiliate program pool before they sell out! Put the option pool in the post, we’re your hot tub experts!

Option grants go down as the company gets closer to its Series B, starts making money, and otherwise reduces risk. The top end of these ranges are for proven elite contributors. Most option grants are near the bottom of the ranges. Many factors affect option allocations including the quality of the existing team, the size of the opportunity, and the experience of the new hire. Bring up your hiring plan before you discuss valuation. Discuss your hiring plan with your prospective investors before you discuss valuation and the option pool. You have to play option pool shuffle.

The only way to win at option pool shuffle is to not play at all. Put the option pool in the post-money instead of the pre-money. Still, don’t try to put the option pool in the post-money. Your investor’s norm is that the option pool goes in the pre-money. When your opponent has different norms than you do, you either have to attack his norms or ask for an exception based on the facts of your case. Both straits are difficult to navigate. Instead, skillful negotiators use their opponent’s standards and norms to advance their own arguments.

You apply normative leverage in the option pool shuffle by using a hiring plan to justify a small option pool. You can’t avoid playing option pool shuffle. TJICistan » Blog Archive » how much stock do you give to key personnel ? Reply to dispatches from TJICistan » Blog Archive » how much stock do you give to key personnel ?

While the above is presented as a somewhat combativitve strategy, I think the result of using the above and focusing on the hiring plan result in both the VC and the Entrepreneurs feeling better about the post-deal plan. Adam, let them chase you a little bit too. Most VCs can appreciate an entrepreneur who is focused on building his business and doesn’t want to raise money full-time. If a VC is asking for an inordinate amount of diligence and meetings, forget them and move on. They’ll be even worse once they’re on your board.

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