A block of equity (typically 10-20%) reserved for future employees, advisors, and consultants.
Why it matters: Investors usually require the option pool to be expanded *pre-money* during a fundraise, meaning the founders take 100% of the dilution for the new employee pool.
In practice: Before closing a Series A, the VC requires expanding the option pool to 15%. This comes entirely out of the founders' ownership percentage before the VC's capital is factored in.