1/ All lawyers, angels, VCs and other founders, who are telling founders to create a large option pool out of the gate - please stop this is just plain bad advice. At pre-seed the pool should be 8-10% if the founding team is complete.

2/ While it is true that over the lifetime of a successful startup likely at least 20% will go into the pool it is better to allocate more into the pool later, as needed. The reason is that founders should own as much stock as possible out of the gate ahead of all dilution.

3/ The difference is if in the future founders don’t own enough and need to be refreshed out of the option pool they will get options which are much more expensive from both cost basis and taxes perspective compared to the founder’s stock which has basically 0 cost and 0 taxes.

4/ The only reason to have a large pool at pre-seed is if you need to add co-founders or major hires, otherwise it is not needed and doesn’t make sense.

5/ Another reason extra option pool is a bad idea is in case of an early exit. In that case ungranted option pool goes away as if it never existed and that makes everyone, including investors, own more. This means that founders just gave upside to investors they could have had.

6/ In general, it is relatively easy to add to the pool. More broadly, founders - it is a lot easier to part with equity, get diluted than to maintain or increase your equity. Don’t give out equity unnecessarily it is precious! /end