What is an ESOP?
An Employee Stock Ownership Plan (ESOP) or Option Pool is a chunk of your startup's equity set aside to grant to future employees. It is a critical tool for attracting top talent without paying massive corporate salaries. VCs usually mandate the creation of an ESOP before they invest.
Frequently Asked Questions
How big should an ESOP be?
A standard ESOP pool ranges from 10% to 15% of the post-money valuation. However, it should be calculated based on your actual hiring plan for the next 12-18 months rather than just picking a random percentage.
Does the ESOP dilute founders?
Yes. The ESOP is mathematically squeezed into the "Pre-Money" valuation, which means the founders bear 100% of the dilution impact, protecting the new investors' equity stake.