Raising money
Option pool
An option pool is a block of company shares set aside so future employees or advisors can be given the right to buy shares later at a fixed price.
Also called employee option pool, ESOP
Investors often ask for the pool to be created or enlarged before their money comes in. When it is counted inside the pre-money valuation (the company's value before the new money), existing shareholders, mostly the founders, take the dilution (the shrinking of their share). The headline valuation stays the same.
This is not legal or tax advice, check with a lawyer or accountant.
When this shows up
Example, not a real founder: a term sheet, the short summary of a deal's terms, offers a valuation you are happy with. A later line asks for a larger option pool, counted before the investment. Your share after the round is smaller than the valuation alone suggested.
What to do next
Ask the investor for the cap table (the list of who owns what) after the round, with the pool included. Compare your ownership there with what you worked out from the valuation alone.