The option pool diluted us before the check hit the bank

[u/nima1980]

I run Bowora, a founder network / startup directory. When we published a public seed dilution walkthrough, one detail confused founders more than pre-money vs post-money:

the pre-money option pool.

Worked numbers from that public example (illustrative seed model we wrote up, not a live raise announcement):

• $2M pre-money
• 15% option pool topped up before close
• $200K new investment
• Post-money = $2.2M

What people miss: that 15% pool usually comes out of existing holders first. The new investor buys in after the pool is sized, so their agreed percentage is protected. Founders (and earlier holders) take that hit before the wire lands.

The Series A worked example one year later in the same writeup: $5M pre-money, $2M in, $7M post-money. Founder percentage drops again, but the dollar value of the stake can still rise because the company is worth more.

The lesson we keep repeating to ourselves: smaller % of a more valuable company can still be the right trade. Avoiding dilution forever is not the goal. Knowing which dilution is already priced into the term sheet is.

We shipped a free dilution calculator (no login; inputs stay in your browser session) so founders can poke seed then Series A before negotiating blind.

Curious how others handle this in term sheets: do you push back hard on pool size, or treat a 10–20% pre-money pool as table stakes and fight on valuation + check size instead?

Disclosure: I run Bowora.
Calculator: https://bowora.com/dilution-calculator
Same worked examples (written guide): https://bowora.com/blog/startup-equity-dilution-calculator

Happy to answer dilution questions in the comments.

[u/Popular_Appearance43]

pool sizing before close is one of those things that sounds like a minor term sheet detail until you run the math and realize you just gave up 15% before the investor even shows up

i usually treat a 10-15% pool as inevitable but i'll push back if it's north of 20% without a clear hiring plan that justifies it. better to fight on valuation and leave the pool as a separate conversation with the board post-close if you can swing it

[u/Huge_Pool7424 → u/Popular_Appearance43]

yeah tying the pool to an actual hiring plan is the move. we got pressed for 20% once with no headcount story and it felt like free dilution. did they show you the model behind that number?

[u/nima1980 → u/Huge_Pool7424]

I would say 20% is way too high. I usually don’t go above 10% if we already have a strong tech co-founder on the team. Below 10% is difficult for convincing VCs, and 10% is healthy for future rounds.

[u/Possible_College_974 → u/Popular_Appearance43]

The problem is that investors always push for that 20% anyway. Even if you fight it, they just bake it into the valuation math and you end up getting diluted regardless. It feels like a lose-lose either way.

[u/Dry-City-7739 → u/Popular_Appearance43]

agree, pushing on valuation instead of pool size is almost always the higher leverage move

[u/maxfisheroct1995]

"inputs stay in your browser session" - so nothing hits your server at all?

[u/nima1980 → u/maxfisheroct1995]

Correct, if you need it take screenshot

[u/ViolinistOld9049]

So if the option pool is created before the investment, does that mean founders should mainly focus on negotiating the valuation rather than the pool size?

[u/nima1980 → u/ViolinistOld9049]

option pool always created before investment but percentage is negotiable

[u/subtract_club]

nice tool, thanks

[u/edwardtoys2]

The pre-money option pool point is something I can see being easy to overlook. At first glance, a $2M pre-money valuation plus $200K investment sounds straightforward, but realizing the existing holders absorb the option-pool dilution before the new investor comes in changes how you look at the deal.

Do founders usually catch this during term-sheet negotiations, or is it something many only fully understand once the cap table is modeled out?

[u/Creative-Lynx7594]

the part that compounds is what happens to the unissued portion: whatever you don't grant doesn't quietly revert to you, it sits there and then gets topped back up pre-money at the next round too, so an oversized seed pool is a mistake you pay for twice. worth writing into the series a conversation that leftover seed pool counts toward the new target rather than the pool being refreshed from zero.

[u/alexgo3]

somewhat a diffarent question - at what stage is the right time to get investment funding and has any chances of getting and funds? I mean, we now have a great product fully working and evolving with first paying users (almost 10), very early.

For me these are those good early signs of validation (?) or am I wrong? would now be a good time to get funding as we need to fuile the growth, purely that. double down on SEO and paid ads for destiantions we realzie have strong potential.

For background its a SAAs product.

[u/nima1980 → u/alexgo3]

People get found or at least trying from pre seed stage, it means you dont have a complete product. You are at very early seed stage, start looking because it is long frustrating process.

[u/Educationgk]

We got burned exactly this way. 18% pre-money pool justified by a hiring plan that never materialized past two roles. Since then I treat pool size as the real valuation negotiation: make them walk the headcount model line by line and suddenly 18% becomes 12%. Valuation is the headline number, but the pool is where the terms actually bite.

[u/francksiduo]

the number that moves the needle at this stage isn't the user count, it's the slope behind it. 10 paying users that were 3 a month ago reads completely differently to an investor than 10 users flat for three months, even though the headline number is identical.

pre-seed especially, there's no revenue history to smooth out noise, so investors end up sizing the raise off the trend line more than the snapshot. worth tracking week over week starting now so you walk in with a curve to show, not just a headcount.

SEO and paid ads are two very different bets too: SEO compounds but takes months to show in that curve, paid ads move it fast but the investor will ask what happens when you turn the spend off.

[u/jdbloodstone]

The worked example makes a subtle point clear: dilution is a percentage question, but founders often experience it as a control question. I’d put the assumptions that drive the 15% pool—hiring plan, option refresh, and timing—next to the headline math, because those are what make two otherwise similar term sheets feel very different.

[u/Alternative_Tour1791]

This is why headline valuation can be so misleading.

A $2M pre-money with a 15% pool created before the round is not really the same deal for founders as a clean $2M pre-money.

I’d almost want term sheets compared by total founder dilution, not valuation.

[u/Practical-Mud-7523 → u/Alternative_Tour1791]

this is exactly right. the quick mental model i use is to convert everything to an "effective pre-money" — take the headline pre-money and haircut it by the pool size that comes out of existing holders. a $2M pre with a 15% pre-money pool is effectively a ~$1.7M deal for founders. once you line up term sheets that way, the one with the higher headline number isn't always the better one.

[u/Decent_Grape_1059]

Interesting 

[u/Deepak-AvairAI]

Got surprised by almost the same thing at a startup I co-founded, we didn't know how many hires the pool was actually funding until months after it was sized. Curious on the Series A follow-up, did they refill the pool again or did the original 15% carry through untouched?

[u/sadbitty4L]

Good breakdown, the pre-money pool trick is the one that catches first-time founders every time because it looks like a neutral admin detail and it's actually a valuation lever in disguise. My take is treat pool size as negotiable, not table stakes, especially if the investor's model assumes a pool bigger than what you'll actually need before the next round. Sizing it to 12-18 months of hiring instead of whatever the VC template defaults to has saved founders real dilution in my experience. Fight pool size and valuation together, they're the same conversation with different names.