How many shares should be reserved under the company’s option plan?

TLDR: 10% to 20% is typical.

Companies typically reserve between 10 percent and 20 percent of their fully-diluted capitalization (i.e., outstanding stock, options and warrants, plus the shares reserved under the plan) for employee stock options. Note that investors will often negotiate this percentage with the company at the time of a financing, which may result in an increase or decrease in the number of shares reserved under the plan at that time. This often continues happening throughout the Company’s lifecycle in connection with financings so that there is sufficient room in the equity plan to continue granting equity to employees and service providers.

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