Ask the Collective
The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
How should an option pool be structured when raising capital—should new shares be created, or should the pool come from founder shares?
When setting up an option pool, **new shares should be created** to dilute the whole company pro-rata, rather than coming from founder shares alone. This is market standard practice. **Key principles:** - New shares dilute everyone proportionally—all shareholders (founders, existing investors, employees) take the dilution, not just founders - This applies unless your Shareholder Agreement or Articles of Association explicitly contain non-dilution clauses, which are rare outside of specific anti-dilution protections in investment rounds - Option pools are typically **excluded from anti-dilution top-ups**, meaning everyone dilutes pro-rata when the pool is created - If your Articles or legal docs specify that one person takes the full hit, that would be non-standard and should be reviewed **Tax-efficient route in the UK:** - Consider setting up an **EMI (Enterprise Management Incentives) share option scheme**, which offers tax efficiency for employees. See: https://www.gov.uk/tax-employee-share-schemes/company-share-option-plan **What members did:** - Several members set up their option pools to dilute everyone proportionally when established - One member noted that an investor/board member pushing for founder-only dilution was incorrect—this runs counter to 10 years of VC market practice **Caveat:** If your SHA or investment docs include specific non-dilution or anti-dilution clauses, review them carefully—but standard practice is pro-rata dilution for option pool creation.
Should we use non-voting share classes, and how does this affect fundraising and investor relations?
Non-voting share structures are generally not recommended for fundraising. Most sophisticated investors will not accept non-voting (B class) shares, as investors typically expect proportional shareholder voting rights tied to their equity stake. However, in practical terms, this concern is often overstated: since most early-stage investors hold under 1% of the company, their individual voting power is minimal and won't significantly inhibit founder control anyway. The community consensus favours simplicity: - **Single share class structure** — recommended as the cleanest approach. Keeps cap table uncomplicated, gives all investors a voice, and avoids the friction of explaining voting restrictions to prospective investors. Members note this is often easier to manage as you scale. - **Realistic investor impact** — even with full voting rights, small investors (under 1%) have negligible practical influence, so the theoretical concern is often not the bottleneck it first appears. Caveats: There is no single "correct" way; different structures have trade-offs. But if you're seeking outside investment, expect pushback on non-voting shares from institutional or experienced investors, making a single share class the pragmatic choice for fundraising ease.