ESOP
ESOP is the employee stock pool · typically 10-20% of cap table · expanded each round to attract talent.
ESOP is the employee stock pool · typically 10-20% of cap table · expanded each round to attract talent.
Basic
ESOP (or "option pool") is the reserved share count for employee stock options. At founding, typically 10%. Expanded to 15-20% after Series A, 20%+ by Series C. Hot AI labs (Anthropic, Mistral, Cohere) push 22-28% because competition for talent is fierce. ESOP expansion before a priced round dilutes existing shareholders before the new money.
Deep
ESOP mechanics: company board approves share pool size. Shares are granted to employees at fair market value (409A) on grant date with a vesting schedule (usually 4-year, 1-year cliff). Unused pool rolls forward; depleted pool triggers top-up. Anthropic reportedly had 25% ESOP post-Series E · enormous by SaaS standards but standard for frontier AI. Common pattern: 1% ESOP for senior engineers, 0.1-0.5% for mid-level, 0.01-0.05% for junior.
Expert
ESOP gotchas: pool expansion immediately before a priced round dilutes founders + existing investors, not incoming. "Option pool shuffle" is the negotiation over who absorbs the dilution. Advanced ESOPs include double-trigger acceleration (vesting accelerates on change of control + termination), post-termination exercise window extensions (typically 7-10 years at top labs now), and secondary sale provisions. Tender offers let early employees sell to incoming investors · common at unicorn+ stage.
Depending on why you're here
- ·Employee option pool · typical 10-25% of cap table
- ·Expanded each round · top labs push 25%+
- ·Pool expansion dilutes existing before priced round
- ·Measure by % at grant · not absolute numbers
- ·Check vesting, cliff, post-termination exercise window
- ·AI labs extending 10-year exercise windows is the new norm
- ·ESOP expansion is a round negotiation lever
- ·Pool shuffle determines pre-money absorption
- ·Elite AI talent demands larger pools
- ·The slice of the company owned by employees via stock options
- ·Most tech startups give out 10-20% of the company to employees
- ·Lets early employees share in the upside if it hits big
AI ESOP is the arms race no one talks about · 25% pools and 10-year exercise windows are the new normal at frontier labs.