Setting up your employee option pool correctly is the difference between retaining killer talent and giving away equity for nothing. This checklist breaks down exactly how to size, approve, and manage your equity pool before your next funding round.

A solid option pool ensures you reserve enough equity to attract early hires without diluting founders prematurely.

• Benchmark: Aim for 10-15% at pre-seed and 15-20% at Series A (post-money).
• Rule: Always size the pool using a bottom-up hiring plan, never just accept a random VC suggestion.
• Warning: Handing out equity without a standard four-year vesting schedule will wreck your cap table.

Here is a basic bottom-up hiring plan template. Never authorize a pool without modeling this first.

Follow these exact phases to ensure your option pool is correctly modeled and legally sound.

Phase 1: Sizing the pool

1. Model your hiring plan: Project every role you need to hire between now and your next round. This is usually a window of 18-24 months.
2. Assign equity ranges: Map competitive equity bands to those roles based on market data from authoritative platforms.
3. Calculate total requirement: Sum up the equity needed for all projected hires. Add a 2-3% buffer for opportunistic hires or retention grants.

Phase 2: Board and legal approval

1. Draft the equity incentive plan: Have your legal counsel draft the formal plan detailing vesting schedules and exercise windows.
2. Obtain board consent: Get formal board approval for the exact size of the pool and the standard vesting terms.
3. Run a 409A valuation: If you are past the idea stage, get an independent 409A valuation to set the strike price for the options.

Phase 3: Allocating and communicating

1. Structure standard vesting: Implement the standard four-year vesting schedule with a one-year cliff to protect your cap table.
2. Integrate the framework: Use a structured B2B SaaS option pool framework to ensure equitable distribution across departments.
3. Communicate the upside: Show candidates the potential dollar value of their options at exit, not just a raw percentage.

Do not guess your pool size. Rely on established startup equity benchmarks to defend your allocation against investor demands.

• Pre-seed: 10-15%
• Seed: 10-15%
• Series A: 15-20%

Sample math.
If you raise a $2M seed round at an $8M pre-money valuation, your post-money valuation is $10M. Creating a standard 10-15% option pool means reserving $1M to $1.5M worth of equity. If your bottom-up hiring plan only requires 8-10%, negotiate the pool size down to minimize founder dilution.