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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 andrew@startupspot.com,
or my twitter which is @myShoggoth. Thank you.