# The option pool shuffle

> Why a 10% pool sized post-money but created pre-money turns a $8,000,000 pre-money into $7,000,000.

Source: https://lopifi.com/learn/safe-conversion-and-dilution-math/option-pool-shuffle
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is the option pool shuffle?** Why a 10% pool sized post-money but created pre-money turns a $8,000,000 pre-money into $7,000,000.

The Seed term sheet says $8,000,000 pre-money and a pool of 10% post-money. Northwind's unissued pool is 935,000; to reach 10% of the post-round shares it needs 284,812 more, and the term sheet puts them in the pre-money. That is the [option pool shuffle](https://lopifi.com/md/glossary/option-pool-shuffle): the new shares raise the pre-money share count, which lowers the price, and the existing holders pay for a pool meant for people hired with the investors' money.

|  | Price per share | What the existing shares are priced at |
| --- | --- | --- |
| Pool top-up outside the pre-money | $0.844444 | $8,000,000 |
| Pool top-up inside the pre-money (the term sheet) | $0.819798 | $7,000,000 |

The same headline valuation, with and without the top-up in the pre-money.

> **A pool in the pre-money is a lower valuation in disguise: $8,000,000 less the pool's $1,000,000 is an effective pre-money of $7,000,000.**

**Pool in the pre-money, sized to the investor's number**
- Pro: The investor's percentage is exactly as quoted
- Con: The founders bear all of the new pool's dilution
- Best for: The investor's opening position

**Pool sized to a hiring plan**
- Pro: A smaller top-up, so less pre-money dilution
- Pro: The pool matches the people the round will hire
- Con: Takes a plan the investor believes
- Best for: A founder with a real hiring plan

**Pool in the post-money**
- Pro: Everyone, investors included, pays for the pool
- Con: The investor shares the dilution, so the investor resists
- Best for: Rarely accepted, but worth naming

Negotiating the pool

> “The result is that while the safes are not diluted by each other, the safes will be diluted by the new money raised in the Equity Financing.”

— [Y Combinator, Post-Money SAFE User Guide](https://www.ycombinator.com/documents), What “post-money” means: post the SAFEs and the old pool, not the round's new pool

## Where this page's rules come from

- [Y Combinator, Post-Money SAFE User Guide](https://www.ycombinator.com/documents) — What “post-money” means: post the SAFEs and the old pool, not the round's new pool (reference)

## Read further

- https://lopifi.com/md/accounting/option-pool

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Part of:** [SAFE conversion and dilution, worked end to end](https://lopifi.com/md/learn/safe-conversion-and-dilution-math) — 5 min
- **Terms taught:** [Option pool shuffle](https://lopifi.com/md/glossary/option-pool-shuffle), [Option pool](https://lopifi.com/md/glossary/option-pool), [Pre-money valuation](https://lopifi.com/md/glossary/pre-money-valuation)
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- **Next:** [SAFE versus note at conversion](https://lopifi.com/md/learn/safe-conversion-and-dilution-math/safe-vs-convertible-note-conversion)
- **The course:** https://lopifi.com/md/learn