ESOP Pool

An ESOP pool is a block of shares reserved for future grants under an Employee Stock Option Plan. It does not represent issued shares — it is a notional reservation against the fully-diluted cap table that will be drawn down as grants are made.

Standard Indian startup sizing:

• Seed: 5–10% post-money
• Series A: 10–15% post-money
• Growth stage: 8–12% post-money (often topped up after large hires)

Pre-money vs post-money pool — the hidden dilution:

This is the single most contested clause in early-stage Indian VC term sheets.

• Pre-money pool: the pool is created (or topped up) before the new investor money comes in. Existing shareholders dilute to make room for the pool. Investors prefer this.
• Post-money pool: the pool is created after the round. All shareholders dilute pro-rata — including the new investors.

Worked example — ₹100 crore post-money, ₹20 crore new investment (20% to investors), 10% target ESOP pool:

• Pre-money pool: pool is carved out of the 80% pre-money base. Founders bear most of the 10% dilution. Investor walks in with a clean 20%.
• Post-money pool: pool is 10% of the post-money 100. Investor's 20% becomes effectively 18% post-pool. Founders bear less.

Mechanical sizing inputs:

• Hiring plan for the next 18–24 months
• Expected grant sizes by level (founder / VP / Director / SDE)
• Replenishment philosophy (pool sized to cover next round's hires? next 12 months?)

Compliance points:

• The pool itself requires special resolution under Section 62(1)(b) and approval of the ESOP scheme. MGT-14 filed within 30 days.
• A board resolution alone is not enough to expand the pool — another special resolution is required.
• An unutilised pool can be cancelled by board resolution; it does not affect already-granted unvested options.

Kapitalyze's ESOP Management tracks pool authorized, granted, vested, exercised, and lapsed — and models pre-money vs post-money dilution scenarios live during term sheet negotiation.