ESOP basics for startups
Pool sizing, vesting mechanics, and the leaver scenarios everyone forgets to plan for.
8 min read
Sizing the pool
Seed-stage pools typically land between 10% and 15% fully diluted. Investors often require the pool to be created or topped up before the round, which shifts the dilution onto existing holders, so model the pool as part of the round, not after it.
Size it against a real hiring plan for the next 18 months rather than a round number. An oversized pool dilutes you for options that are never granted.
Vesting mechanics
The standard is four years with a one-year cliff: nothing vests for the first year, a quarter vests at the cliff, and the rest vests monthly. The cliff protects the company from short stays; monthly vesting after it keeps the incentive continuous.
Founders should be on vesting too. Investors will insist, and any co-founder who objects is telling you something.
When people leave
Decide the leaver rules when you create the pool, not when someone resigns. What happens to unvested options is easy: they return to the pool. The real decisions are exercise windows for vested options and what counts as cause. Write them down while nobody is angry.