Why is issuing ten percent not a ten percent pool?

Because the new shares count toward the total. Ten percent of the current count becomes about nine point one percent of the enlarged company, so the shares must be divided by one minus the target instead.

How big should a pool be?

Big enough for the grants planned before the next round, which is what the hiring check here is for. Sizing by convention alone leaves the pool short or dilutes for nothing.

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Employee Option Pool Calculator

How many new shares an option pool needs and what it costs the existing holders. The arithmetic is circular, since the new shares are part of the total they are a percentage of, and getting that wrong undersizes the pool every time.

Also called: esop pool calculator, option pool sizing.

New shares for the pool

888,889

888,889 new shares to reach a 10% pool, diluting existing holders by 8.16%. Issuing 10% of the current count instead would give a pool of only 9.09% of the enlarged company. The new shares have to be divided by one minus the target, not multiplied by it, because they count toward the total they are a share of. The plan of 20 hires at 0.3% each uses 60% of the pool, leaving room for refreshes and for the grants that were not planned.

Pool after the increase

1,088,889

Dilution to existing holders

8.16%

Shares outstanding after

10,888,889

Value of the pool

$8,711,111.11

Share of the pool the hiring plan uses

60%

Hires the pool supports

On sizing

Issuing 10% of the current count instead would give a pool of only 9.09% of the enlarged company. The new shares have to be divided by one minus the target, not multiplied by it, because they count toward the total they are a share of.

On coverage

The plan of 20 hires at 0.3% each uses 60% of the pool, leaving room for refreshes and for the grants that were not planned.

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Pool size against dilution

Target pool	New shares	Dilution
5%	315,789	3.06%
7.5%	594,595	5.61%
10%	888,889	8.16%
12.5%	1,200,000	10.71%
15%	1,529,412	13.27%
20%	2,250,000	18.37%

Method and background

How this is calculated

A ten percent pool means ten percent of the company after the pool exists, not ten percent of what exists now. Issuing ten percent of the current count gives a pool of nine point one percent of the enlarged company, which is the mistake this page exists to prevent: the new shares have to be divided by one minus the target rather than multiplied by it. The page also checks the pool against the hiring plan, because a pool sized by convention rather than by the grants it has to cover is either short within a year or dilutive for no reason.

the new shares must be a target share of the enlarged total, not of the current one, which is why the denominator is one minus the target

q: Shares outstanding
t: Target pool share
e: Existing pool share

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

topping a 2% pool up to 10%

Shares outstanding: 10,000,000
Target pool, post-issue: 10%
Pool already in issue: 2%
Hires to cover: 20
Average grant: 0.3 %
Current price a share: $8.00

New shares for the pool888,889

10m x 0.08 / 0.9

Open this example

no existing pool

Shares outstanding: 10,000,000
Target pool, post-issue: 10%
Pool already in issue: 0%
Hires to cover: 0
Average grant: 0.3 %
Current price a share: $8.00

New shares for the pool1,111,111

boundary: 1.111m of 11.111m is exactly 10%, where issuing 1m would give 9.1%

Open this example

Method and limits

What it assumes

Grants expressed as a percentage of the fully diluted company at the time of grant.

What it deliberately does not model

Refresh grants, leaver forfeitures returning to the pool and repricing all change the real consumption rate.
A pool created before a funding round dilutes existing holders alone, which is a negotiation rather than arithmetic.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Why is issuing ten percent not a ten percent pool?: Because the new shares count toward the total. Ten percent of the current count becomes about nine point one percent of the enlarged company, so the shares must be divided by one minus the target instead.
How big should a pool be?: Big enough for the grants planned before the next round, which is what the hiring check here is for. Sizing by convention alone leaves the pool short or dilutes for nothing.