My next screencast is on Option Pool Creation.
We’re posting these videos in our StartupSpot YouTube Channel, and below is the video with a transcript:
“Hi, this is Andrew with StartupSpot and today’s topic is Option Pool Creation.”
“So there are two main ways of creating your option pool, the first is pre-money, and the second is post-money. Pre-money comes from the pre-money owners of the company, so if we have a three million dollar pre-money valuation and a three million dollar investment normally that is split 50/50 between the founders and investor.”
“But when you have a pre-money option pool creation the entire option pool is taken from the existing investors or the founders. So here the founder now get 40%, the investor 50 and the option pool is clearly comes out the founders. If this was done post-money, the dilution is shared between the two and each get 5% off, so 45, 45, and 10.”
“Let’s take a look at this in the screencast example I did before, with the pre-money valuation company. And what we’re going to do first is we’ll just change the name to something more generic, like screencast example. I’m also going to mark this as a public company which means that you can also go to this url.”
“So let’s put in a 10% option. And you’ll notice that if I make this post-money, the price per share is the same as it was before, one dollar per share. If I change it to pre-money, it now adjusts that price per share to a little over 88 cents. This it how it basically works, is it adjusts the price per share to bump up the investors shares to the correct percentage.”
“If you have any questions, comments, or requests for topics let us know at StartupSpot.com, you can email me directly at [email protected], or my twitter which is @myShoggoth. Thank you.”