Home / Guides / The option-pool shuffle
Dilution mechanics guide
When a lead asks for a "15% pool" as part of the term sheet, most founders treat it as a shared cost. It isn't. Because the pool is created pre-money, its entire dilution lands on existing holders — you — before the new investor's money is diluted at all. This is the option-pool shuffle, and it quietly moves several points of the company off you. Here's the exact math, a calculator, and how to negotiate the number instead of accepting it.
A priced round negotiates a pre-money valuation. If the lead also wants the option pool counted inside that pre-money — the standard ask — then the pool is carved out of the pre-money holders' slice before the new money arrives. The new investor buys their percentage of the post-money company clean, undiluted by the pool. You absorb all of it.
The mechanical result: your effective pre-money valuation is lower than the headline number, because a chunk of it is now earmarked for a pool you're funding entirely. A "$10M pre-money with a 10% pool" is not a $10M pre-money to you.
The engine behind this site computes the pre-money pool drag — the percentage points of existing-holder ownership the pool consumes — with one deterministic formula:
The intuition: the pool is pool% of the post-round company, but it's carved from the pre-money portion, so the share of it that actually comes off you scales by how much of the company the pre-money represents. The bigger your pre-money relative to the raise, the more of the pool you eat.
Take a seed round: $3M new money on a $12M pre-money, with the lead asking for a 10% post-round option pool.
So the "10% pool" moves roughly 8 percentage points of ownership off existing holders — before the new investor absorbs a single point of it. That's the number most founders negotiate blind. If you'd instead agreed the pool be carved post-money (shared by everyone including the new investor), you'd eat only your pro-rata share of it.
This is the exact poolShuffleCost formula from the report engine: drag = pool% × (pre ÷ post). It isolates the pre-money pool effect; your full post-round split also depends on your SAFE stack and share count, which the report re-derives from your cap table. Illustrative arithmetic, not a valuation — verify with your counsel and accountant.
The same 10% pool costs you more when your pre-money is large relative to the raise, and less when the raise is a big fraction of the post-money:
| Pre-money | New money | Pool | Drag on you |
|---|---|---|---|
| $6M | $3M | 10% | 6.67 pts |
| $10M | $3M | 10% | 7.69 pts |
| $12M | $3M | 10% | 8.00 pts |
| $28M | $7M | 15% | 12.00 pts |
Every figure is the drag = pool% × (pre ÷ post) formula. The last row is a Series A-shaped round: a 15% pool on a $28M pre / $7M raise moves 12 points off existing holders.
Being able to reproduce this number is a weight-2 cap-table item on the kill-list: "you can show the post-round ownership math including the option-pool refresh and where its dilution lands." A founder who can't reproduce it negotiates the pool blind — and a lead who senses that will name the higher number. A founder who walks in with the drag already computed negotiates from strength.
This calculator isolates the pool effect. The $79 report re-derives your full split from your actual cap table — SAFE conversion, MFN, the pool shuffle, and pro-rata — so you see every point in play, not just the pool's.
Get the report — $79 →Yes — most US priced-round term sheets count the option pool inside the pre-money, which is why the shuffle is so common. It's not a trick; it's convention. The problem isn't that it's done, it's that founders often accept the pool size without seeing that they're funding all of it. Knowing the drag lets you negotiate the size and the timing.
Not when it's created pre-money — that's the whole point. The new investor buys a clean percentage of the post-money company; the pool is already carved out of the pre-money holders' slice before they arrive. If you can get the pool shared post-money, the new investor absorbs their pro-rata share, but that's a negotiation you have to win explicitly.
Size it bottom-up to your actual hiring plan for the next 12–18 months — the grants you'll genuinely make before the next round — rather than accepting a round default. That number is often smaller than the 10–15% reflexive ask, and every point you shave off is a point that stays with existing holders per the math above.
Related guides