The key insight this week
Multiple independent operators have asked this week about employee option pools sizes. Two might be a coincidence, but three questions on the same subject? That's a newsletter topic.
As you can imagine, the employee stock option pool begins rather modestly. The median pre-seed company reserves about 9% of company equity for the pool. That median grows to almost 19% by the time a company raises a Series D.
The range between the 25th and 75th percentiles in each stage is quite wide (about 10% or so). Clearly the ultimate option pool size is sensitive to individual company circumstances.
Looking at the same data split by industry, there aren't many clear patterns. One standout may be consumer startups, which tend to have smaller option pools.
Compensating employees with equity is a default assumption for many tech startups. However, right-sizing the option pool to your company lifecycle matters. In future analysis, we'll take a look at utilization of the authorized pool—are many startups coming into their next round of funding with very few shares left? Or are pools generally well stocked?
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Peter Walker
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