Uomodellamansarda’s Reviews > Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist > Status Update

Interesting section on the liquidation preference and conversion rights.
Something I didn't know.

Let's say with our previous example of a $5 million investment at 20$ million premoney. Assume that you have an existing option pool that has options representing 10% of the outstanding stock reserved and unissued. The VCs suggest that they want to see a 20% option pool. In this case, the extra 10% will come out of the pre money valuation resulting in an effective premoney valuation of $18 million.