What is ESOP Pool Sizing for Seed Round?
Nexa Consultancy | Startup & Finance Glossary
When raising a seed round, investors will typically require the startup to create an Employee Stock Option Pool (ESOP) of 10-15%. This pool is usually created before the new investment, diluting the existing shareholders (i.e., the founders).
Startup Example: A startup with a pre-money valuation of ₹20 Crores needs to create a 10% option pool. This 10% is carved out of the pre-money valuation, effectively reducing the founders' valuation to ₹18 Crores before the new investment comes in.
We help model these scenarios in our fundraising advisory.