A term sheet can hold the valuation constant and still change the economic deal. The size and timing of the employee option pool are two ways that happens.

Timing allocates the cost

Carta distinguishes a pool created before a financing from one created after it. A pre-money increase falls on existing holders. A later increase spreads dilution across the holders at that time, including the incoming investor. A pool is a reserve for future grants; it is not automatically cash paid to employees.

Make the trade-off visible

Illustration: $4 million invested at $16 million pre-money buys 20% of the $20 million post-money company. With no existing pool, a new 10% post-financing pool carved from the existing holders leaves them 70%. If instead all holders share a subsequent 10% dilution, the investor ends at 18% and existing holders at 72%.

Bring a hiring plan

Our review approach starts with roles, expected grant sizes, and timing. It separates already-promised grants from unused reserve. That gives the discussion a concrete object: which hires does this pool fund? Show both scenarios in the same share model, then document exactly which pool definition the term sheet uses.

Keep the context

Constructed single-round example with no outstanding SAFEs, warrants or prior pool. Fully diluted share definitions matter.

Financial education, not investment or legal advice. Historical notes are retrospective analysis prepared in September 2026, not contemporaneous Venture Trace reporting.

Sources & scope

01

Carta

What is an option pool? A guide for startup founders

Source date
20 Aug 2026
Retrieved
16 Sept 2026
Period / geography
Evergreen reference · United States context

Option-pool timing and dilution

Page checked on retrieval date; not a historical snapshot. Educational explanation. Actual agreements, reporting conventions and jurisdictions differ.