Options Explanation
Options are short hand for "incentive stock options", which are the right to purchase shares of stock
at a pre-defined "strike" price in the future. That price is set based on the current company value when the
shares are issued, and if all goes well that price will rise and thus the value of the options. This is a very
common way to compensate high-tech workers and more especially early startup employees.
Option Pool (Pool Size)
This is the total number of shares of common stock set aside to be granted as options to employees (and potentially
others).
Granted Options
This is the number of shares of options which have already been granted. It should never be larger than the pool.
Promised Options
This is the number of options promised to key employees prior to an equity round, but not yet granted. This number
plus the number of granted options may actually be larger than the pool, in which case the excess IS treated as
part of the pre-money fully diluted share count. Note, this number may well be zero.
Unissued Options
Unissued options are options which have been allocated in the option pool, but
not yet issued or promised to an individual. This number is generally equal to Pool Size - Granted Options - Promised
Options. Note that in the case where promised options plus granted options is greater than the pool size, unissued options
will be zero.
These options ARE included in fully diluted, pre-money shares. However, they are part of the
option pool following an equity round, therefore if new option shares are included in the denominator
of a convertible's (or the vc's) price calculation, you will see these shares subtracted from that total.
An example will make this a bit more clear. If a 10% option pool is negotiated, this will go in the pre-money.
If this will comprise 500,000 shares and there are 50,000 unissued shares, then 450,000 (500,000 - 50,000)
new options will be authorized and added to the pre-money share count (and thus the price
calculations mentioned above).