How big should a startup option pool be?
By SuLe · Updated 29 June 2026
Most UK startups reserve around 10% of their fully diluted shares for an employee option pool at seed stage, commonly rising to 10–15% by Series A. But the right size is the one that matches your actual hiring plan for the next 18–24 months — a number you can build from the bottom up rather than borrow from a rule of thumb.
Key facts
- A pool of roughly 10% of fully diluted shares is a common seed-stage figure; it typically grows to 10–15% by Series A.
- Size the pool to your 18–24 month hiring plan — role by role — rather than defaulting to a percentage.
- Whether the pool comes from the pre-money or post-money valuation decides who bears the dilution.
- EMI caps each employee at £250,000 of unexercised options and the company at £3m — a ceiling most seed pools sit well under.
- A pool is usually quoted on a fully diluted basis, so reserved-but-unissued shares dilute founders from day one.
How big should the pool actually be?
There is a convention and there is a method. The convention is about 10% of fully diluted shares at seed, typically stretching to 10–15% by Series A as the team grows.
The method is better. List the roles you plan to hire over the next 18 to 24 months, attach a realistic equity figure to each, add a modest buffer, and total it. That bottom-up number is the pool you actually need.
Where the two disagree, trust the plan. An oversized pool dilutes founders for no reason; an undersized one forces an awkward top-up mid-round.
Why does the option pool matter at fundraising?
Because investors price it in, and where it sits changes who pays for it. A pool created before the money goes in — out of the pre-money valuation — dilutes the existing shareholders, which mostly means the founders.
A pool created after — out of the post-money figure — is effectively shared with the incoming investor. Investors usually push for the pre-money version, sometimes called the "option pool shuffle", because it protects their percentage.
This is one of the more consequential term-sheet negotiations, and a couple of points either way is real founder equity. [More: Should the option pool come out of pre-money or post-money?]
How do I size the pool to my hiring plan?
Work forward from the org chart you expect, not the one you have. Senior early hires — a first head of engineering or a commercial lead — command more equity than later joiners, so front-load generously.
A workable approach: assign a percentage band to each planned role, sum them, then add a buffer of a point or two for hires you have not thought of. That total, expressed as a share of the fully diluted cap table, is your pool.
Keep the EMI limits in view as a sanity check: no employee can hold more than £250,000 of unexercised options, and the company cannot have more than £3m outstanding — rarely binding at seed, but worth knowing.
What happens when the pool runs out?
You refresh it. Creating more option shares dilutes all existing shareholders, which is why pool top-ups usually happen at a funding round, when everyone is diluting anyway.
Running low is normal and expected — investors often require a refreshed pool as a condition of investing. What you want to avoid is discovering the pool is empty halfway through a hire, then negotiating a top-up from a weak position.
Track the pool on your cap table as options are granted, so you always know how much headroom is left. [More: What is a cap table and how do I keep it clean?]
| Stage | Typical pool (fully diluted) | Notes |
|---|---|---|
| Pre-seed / incorporation | 0–10% | Often set up with the first key hires |
| Seed | ~10% | The common baseline; size to your hiring plan |
| Series A | 10–15% | Usually refreshed as part of the round |
| Later rounds | Refreshed each round | Top-ups dilute all shareholders |
The percentages above are common market practice, not fixed rules — your plan should drive the exact figure.
Worked example
Nadia founds Cadence, a music-tech startup, with a fully diluted cap table of 1,000,000 shares. She reserves a 10% pool — 100,000 option shares — before her seed round.
She sizes it against an 18-month plan: a senior engineer (25,000), a product designer (15,000), two mid-level engineers (12,500 each, so 25,000), and a head of growth (20,000). That allocates 85,000, leaving a 15,000-share buffer — exactly the 100,000 reserved.
When Cadence raises its seed round, the investor asks for the pool to sit in the pre-money valuation, so it dilutes Nadia rather than the new money. Because she sized it to a real plan, she can defend the 10% figure instead of accepting a larger, investor-preferred pool.
Where founders go wrong
Defaulting to a round number.
A 10% pool that ignores your hiring plan is either dead equity or a coming top-up — build it from the roles you will actually hire.Ignoring where the pool sits in the valuation.
A pre-money pool comes out of your equity; conceding it without negotiation quietly hands value to the investor.Forgetting the pool dilutes on a fully diluted basis.
Reserved-but-unissued options usually count against founders from the moment the pool is created.Not tracking grants.
If your cap table does not show remaining pool headroom, you will over-promise equity you have not reserved.
Related questions
Is 10% a rule or just a convention?
It is a convention, not a rule. Around 10% of fully diluted shares is a common seed-stage pool, typically rising to 10–15% by Series A, but the right number depends on how many people you plan to hire and how senior they are. Size it to an 18–24 month plan rather than defaulting. [More: What is an EMI share option scheme?]
Does the option pool dilute me or my investor?
It depends on whether the pool is created before or after the investment goes in. A pool carved out of the pre-money valuation dilutes the existing shareholders — mainly founders — while a post-money pool is shared with the new investor. This is a heavily negotiated point. [More: Should the option pool come out of pre-money or post-money?]
What counts as 'fully diluted' when sizing a pool?
Fully diluted means all shares as if every option, warrant and convertible were exercised and converted. Pools are usually quoted as a percentage of that number, so a 10% pool means 10% of the enlarged, fully diluted share count. [More: What is a cap table and how do I keep it clean?]
What happens if the option pool runs out?
You top it up by creating more shares, which dilutes everyone. Investors often expect a refreshed pool at each round, so running low is normal — but an unplanned mid-round top-up is a weaker negotiating position than sizing the pool deliberately. [More: How do I set up an EMI scheme?]
Do unallocated pool shares dilute me?
On a fully diluted cap table, reserved-but-unissued pool shares are usually counted as if they exist, so they dilute founders on paper from the moment the pool is created. Unused pool shares can be returned, but only if the pool is formally reduced. [More: What vesting schedule should employee options have?]
Pool sizing looks like a spreadsheet exercise, but it is really a negotiation: how much equity you set aside, and whether it comes out of your pocket or your investor's, shapes your ownership for years. A SuLe solicitor can model the dilution and hold the line at your round. Book a free call about your option scheme and size your pool before the term sheet does it for you.
Keep reading: What is an EMI share option scheme? · How do I set up an EMI scheme? · What vesting schedule should employee options have? · Should the option pool come out of pre-money or post-money? · What is a cap table and how do I keep it clean? · Who is eligible for EMI options?
Primary sources: GOV.UK — Enterprise Management Incentives (EMIs)
