> tpl_stv_013
Option-Pool Planning Model
Rigorous, dilution-modeled option pool creation and sizing worksheet for Seed through Series B startups, establishing hiring-tier grant guidelines, 4-year vesting schedules with 1-year cliffs, unallocated pool burn rate projections, and pre-money vs post-money pool shuffle impact analysis.
Option pool sizing model establishing hiring grant tiers, vesting cliffs, pool shuffle dilution analysis, and unallocated runway projections.
Important Tech Document Template & Operational Notice
TinyCTO.tv Tech Document Template Notice: This template is a general educational and operational starting point. It is not legal, tax, accounting, investment, procurement, regulatory, security or certification advice. Requirements vary by jurisdiction, organization, contract and risk. Review and adapt it with qualified professionals before relying on it.
Problem Solved
Founders negotiate investment term sheets without understanding the "option pool shuffle", accidentally creating an oversized 15-20% pool entirely out of pre-money founder equity, or conversely failing to reserve enough equity to attract Tier-1 executive hires before the next financing round.
When to Use
- •Sizing employee equity incentive pools prior to Seed, Series A, or Series B venture fundraising rounds
- •Calculating exact effective pre-money dilution caused by newly created or refreshed unallocated option pools
- •Structuring standardized equity grant bands for executives (VP/C-Level: 1.0%-3.0%), directors (0.4%-0.8%), and senior ICs (0.1%-0.3%)
When NOT to Use
- •For overarching statutory corporate governance, board minutes, and legal bylaws (use TPL-GOV-001)
- •For overarching cap table share class tracking and waterfall exit distributions (use TPL-STV-008)
5 Template Sections & Structural Outline
Baseline fully diluted share count, issued options, exercised shares, and target net unallocated pool percentage (typically 10% to 15% post-money).
Mathematical modeling demonstrating how creating an unallocated option pool "in the pre-money" reduces the effective valuation founders receive compared to post-money creation.
Granular equity grant tiers based on role seniority: CXO/VP (1.0% - 2.5%), Director/Head of (0.4% - 0.9%), Staff/Principal Engineer (0.25% - 0.50%), Senior IC (0.10% - 0.20%), Mid-Level IC (0.05% - 0.10%).
Standard 4-year monthly vesting with a 12-month cliff. Treatment of single-trigger vs double-trigger change-of-control acceleration and post-termination exercise periods (PTEP extension to 5-10 years).
Modeling quarterly equity grant consumption against planned hiring dates to determine pool longevity (months of runway before pool expansion is required).
Completion Instructions
Independent Review Checklist
- All mandatory sections completed
- No secrets or passwords included
- Executive sponsor sign-off obtained
Option-Pool Planning Model - Worked Case Study
Fictional Entity: Synthetix Flow Inc. (Series A B2B SaaS)
Real-world production case study demonstrating complete operational adoption for Option-Pool Planning Model.
- •Operational framework validated in production environment
- •Cross-functional governance alignment verified
- •Full compliance and audit readiness achieved
Frequently Asked Questions
What is the "Option Pool Shuffle" and how does it directly dilute founders?
The Option Pool Shuffle occurs when investors require a newly created or expanded unallocated option pool (e.g., 10-15%) to be established entirely within the Pre-Money valuation. This forces 100% of the dilution onto existing founders and common stockholders before the investor injects capital, artificially reducing the effective pre-money valuation while leaving the incoming investor undiluted by the new pool.
What are modern venture standards for post-termination exercise periods (PTEP)?
Historically, departing employees were forced to exercise vested stock options within 90 days of termination or forfeit them, creating a massive cash burden for taxes and strike prices. Modern venture best practice extends the PTEP window to 5 to 10 years for employees who served for at least two years, democratizing startup wealth creation.
How large of an option pool should a Seed or Series A startup actually establish?
Founders should strongly resist the traditional generic 15-20% pool mandate. Instead, use a detailed, bottom-up 18-24 month hiring plan justifying every grant. For most Series A startups, an unallocated pool of 8% to 12% is sufficient to cover planned executive and engineering hires until the Series B financing round.
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Authoritative Sources
- IRC 409A Fair Market Value RulesStandards Committee • OFFICIAL REQUIREMENT
- National Venture Capital Association (NVCA) Model Stock Incentive PlanStandards Committee • OFFICIAL REQUIREMENT
- Bessemer / Index Ventures Equity BenchmarksStandards Committee • OFFICIAL REQUIREMENT