# What is Option Pool? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Legal  
> **Canonical Citation:** [https://spidits.com/startup-glossary/option-pool](https://spidits.com/startup-glossary/option-pool)

## Definition
An Option Pool is a block of common stock reserved by a startup to recruit and incentivize future employees, advisors, and key contributors.

## Architectural Mechanics & Deep Dive
An Option Pool is a block of common stock reserved by a startup to recruit and incentivize future employees, advisors, and key contributors. Usually representing 10% to 20% of the company's equity, the option pool is typically created or expanded immediately prior to a priced funding round. The size of the pool is factored into the pre-money valuation, meaning the dilution from its creation is borne by the existing founders.

## Industry Applications & Real-World Use Cases
Employee compensation planning and option grants

## Frequently Asked Questions

### What is the typical size of an option pool?
Usually between 10% and 20% of the startup's total outstanding stock.

### Who bears the dilution when an option pool is created?
If created prior to a priced round, the dilution is borne entirely by the existing founders, reducing their pre-money share price.

## Related Terminology
- [vesting](https://spidits.com/startup-glossary/vesting)
- [cliff](https://spidits.com/startup-glossary/cliff)
- [cap-table](https://spidits.com/startup-glossary/cap-table)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*