Founders Should Start the Option Pool at 8 to 10 Percent

Founders - ignore your VC's advice. You don't need to start your option pool at 15% or 20%, it's just too high!

Start the pool at 8-10% of company equity and then expand it as you fundraise in the future.

That does NOT mean you should be stingy with your employee equity. Generous grants can help attract the best people and these folks deserve to hold significant upside in your business (they're helping you build it, after all).

The underlying dynamic here is: you're just not hiring as many people as you used to. Meaning you can be more generous with each individual employee and still keep equity burn within range.

(To be clear, most of you founders aren't really doing this yet - equity packages have not increased meaningfully for many early employees outside of AI/ML roles).

But you could!

And the investors may disagree but your hiring plan is your own. Make the case for equity pool expansion at the next fundraise, and the one after that, and so on.

The more you know 🙏

BTW data below is for software startups. Hardware startups tend to be slightly more equity dilutive upfront but then level off at similar ranges by Series C or D.