How much should a startup budget for legal fees?
According to SCORE, all told, the majority of small business owners spend between $1,000 and $5,000 per year on administration tasks, including accounting and legal fees.
How does option pool affect valuation?
The option pool lowers your effective valuation. But let’s create $2M worth of new options, add that to the value of your company, and call their sum your $8M ‘pre-money valuation’.” 60\% effective valuation + 20\% new options + 20\% cash = 100\% total.
How is option pool post-money calculated?
A POST-MONEY VALUATION is the value of a company AFTER an investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity. The Post-money valuation is the sum of the pre-money valuation and the money raised in a given round.
How much option pool should a startup founder have?
For example, if one founder has 80\% and his 2-person team has 5\% each and seed capital 10\%, I think a much larger option pool is warranted—perhaps as much as 35\%. This gives the investors some leverage if they need to bring in serious help.
What is an option pool and how does it work?
An option pool is a percentage of a company reserved for employees. New companies create option pools by setting aside common stock shares, and granting these shares to employees as a way to pull new talent into a startup.
How much should a company expand its employee stock option pool?
Once companies grant most or all of the pool, they need to expand it. Expansion usually happens during Series B, and might be 5-10 percent more outstanding stock. By Series C and beyond, adding 1-2 percent is sufficient. The later an employee is hired, the smaller their grant is, because:
What percentage of a company’s share price is option pool?
That pool is often 15-25 percent, but the exact percentage varies. The option pool is a percentage of the value of the company, not a percentage of the available shares. If a round of funding adds shares, shares are added to the option pool to keep it at the negotiated percentage of the company.