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Tim O'Reilly
Re: Valuation and Option Pool -
"mdorov makes a really good point. What Fred didn't make explicit is that the choice isn't whether to have an option pool, but whether it comes out of the pre-money or the post-money valuation. If it comes out of pre-money, it's funded entirely by the entrepreneurs and any preceding investors. If it comes out of the post-money, it's funded by the VC as well. mdorov is right to note that as these options are to be granted to employees hired after the financing, and will produce future value, it would make sense for them to come post-money. But that's precisely why both Fred and Mark Pincus agree that "it's a question of valuation." If options come out of post-money, it's a discussion between management and investor about how much of their mutual equity they want to give up to future employees. If it comes out of the pre-money, it is a question of valuation." - Tim O'Reilly