Where your founder shares actually go in a Series A
The pre-money option pool convention is where most founders lose more equity than they expected. A small tool to see it before signing.
The standard venture term sheet creates the new option pool out of the pre-money cap. That means the new pool dilutes the founders, not the new investor. Most founders intuitively understand the new money piece. Most do not intuitively understand the pool piece. The result is that the actual dilution from a Series A is meaningfully larger than the headline numbers suggest.
The cap table dilution calculator makes the option pool effect visible. Plug in the existing share count, the pre-money valuation, the new money raised, and the target post-round pool percentage. The output shows the new money price per share, the option pool expansion (in shares), and the post-round ownership split for founders, existing pool, prior SAFEs, new pool, and new money.
What to look at
The line that matters most for founders is the new pool row. If the pool expansion is large (often it is, because the lead investor wants room for two or three more hires before the next round), the implicit founder cost is real money. A 12% post-round pool created out of a 5-million-dollar Series A means founders are bearing several hundred thousand dollars of equity dilution that does not show up in the price per share negotiation.
What to negotiate
The most common founder-side ask is that the option pool be created post-money rather than pre-money. The lead investor will resist; this is the standard market convention. A more achievable ask is to size the pool conservatively against an actual hiring plan rather than a generic target percentage. If the hiring plan supports a 7% pool, do not let it get sized to 12% just because the term sheet defaults to that.
Walter Allison is a corporate attorney in Denver. He writes here about M&A, private equity, and venture capital structure.
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