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Option Pool Shuffle

Option Pool Shuffle

The option pool shuffle is the term-sheet tactic where investors push the option pool refresh into the pre-money cap table rather than post-money. Founders and other existing stockholders absorb the pool dilution while new investors get their target ownership percentage of a cap table that already includes the expanded pool, effectively reducing the founder's effective valuation without the reduction showing up in the headline pre-money price. It is one of the most important and least-discussed mechanisms by which "founder-friendly" term sheets become founder-hostile through structural details that aren't visible at first glance.

The mechanic of the option pool shuffle:

  • Headline price: term sheet shows a pre-money valua...

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