There is no definitive approach to the size of a company's option pool. As standard, early-stage UK companies set aside 10-15% of the total fully diluted share capital for their option pools, out of which options over shares may be granted to the company’s directors, employees, consultants and advisors. In determining the appropriate number, founders should consider their hiring plans for the next 12-18 months and plan how much equity may be needed to hire the right people for those roles. Often investors will look to “top-up” the option pool as part of any financing, so there is sufficient headroom to meet these hiring needs, and will insist that this top-up is included in the company’s pre-money valuation (which means it is dilutive on existing shareholders rather than new investors). Having a detailed hiring plan in mind will help a founder in these discussion with an investor and setting an appropriate level of top-up.
Learn More: UK Founder Series: Incentivise Your Team