Startup Terms Glossary
What is an Option Pool?
When a private company decides to go public, they can opt to reserve a portion of the shares in their company for their employees. This section of stock is referred to as an option pool. Option pools are popular with startup companies since they can attract highly-qualified employee candidates. This is because the better the company succeeds, the more money the stockholders make.
Option Pool Examples
Key concepts of an option pool:
- Example 1. Early investors often receive a larger payout
- Example 2. Employees usually must spend a pre-determined length of time with a company before they can cash in on their shares
- Example 3. Generally consists of 15%-25% of entire shares in a company.
Here’s another web page about option pools.
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