In modeling cap tables with multiple rounds, how should you treat option pools to preserve economics?

• A. Include pool as new shares diluting existing holders; reflect new grants; not double count
• B. Ignore option pool
• C. Exclude options from cap table
• D. Treat option pool as debt

Answer: (A)

Options are equity-like instruments that will dilute ownership when they are granted and exercised, so the cap table must treat the option pool as additional shares and track how grants draw from that pool. This approach keeps the economics consistent across rounds: you show the pool as part of the total share count, so existing holders are diluted accordingly, and as grants are issued from the pool, the pool’s available shares decrease and ownership percentages adjust without double counting.

For example, if you have one million shares outstanding and set up a ten percent option pool, you now have one million plus the pool as one point one million shares in the cap table, meaning existing holders’ ownership is about ninety percent and the pool is about ten percent. When options are granted, those shares are taken from the pool, further diluting existing holders but remaining within the same, single pool tracked in the cap table. This keeps the dilution economics transparent and consistent across subsequent rounds.

Ignoring the pool, excluding options from the cap table, or treating options as debt would misstate dilution and misclassify the instrument. Options are equity-based rewards that create potential future ownership, not a liability to be repaid.