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Option pool

An option pool is a number of shares of stock reserved for issuance to service providers of a company pursuant to options and other equity incentives. Providing options to service providers is a way to attract talented employees in a startup because the holders of options can share in the growth in a company’s value if the company goes public or is acquired. For US companies, the option pool size can expand or contract by action of a company’s board of directors (with stockholder approval generally also required for expansions of the pool), and typically expands in connection with venture financing transactions.