Term Sheet Dilution: Round Price and Option Pool
Check two term-sheet numbers before a raise: new round price vs your last 409A and whether the option pool expands before the raise.
A bigger raise can shrink your slice
You are about to review a term sheet, a 409A, or a cap table after a raise. The cap table is the list of who owns what; the raise can look like good news, while your option grant may quietly get smaller.
A raise can bring more cash, a higher valuation, and a stronger signal. For someone holding options, it can also shrink your percentage or raise the strike price you pay. The rule is a two-number check: compare the new round price to your last 409A, and read the option-pool line before the raise.
The market concentration makes the check urgent. Global venture investment in the first half of 2026 totaled $510 billion, a new half-year high that exceeded the $440 billion raised during all of 2025. After excluding OpenAI and Anthropic, the remaining H1 2026 global startup funding was about $293 billion. That leaves a lot of capital, but it is not evenly spread. During Q2 2026, Anthropic's $65 billion raise accounted for nearly one-third of global venture dollars, and the company overtook OpenAI to become the top private company on the Crunchbase Unicorn Board. One round can move the market, and a small term-sheet line can change your ownership.
Round price versus 409A shows the valuation step
A 409A valuation is the company's fair market value for tax purposes. It sets the floor for option strikes, the price at which you can buy shares. When the new round price is above your last 409A, the company is selling shares at a higher price than the last tax value. That is a valuation step up, and your existing options may have more value if your strike is below the new price.
When the new round price is below or near your last 409A, the raise may be a rescue raise, a down round, or a bridge at a lower price. If your strike is above the new price, your options have less value, and the term sheet may include terms that protect, reset, or change your actual strike.
In Q2 2026, 16 startups secured billion-dollar financings that added up to $108.6 billion, representing 53% of the quarter's global venture dollars. A big raise can move the company's value faster than your option grant. A jump in the round price makes your strike look cheap, but a pool expansion can still lower your percentage.
The option-pool line shows the dilution
The option pool is the set of unissued shares reserved for employees, and it is where option pool dilution hides. A company may raise money at a high price and still shrink your ownership by creating or expanding that pool before the new investors buy shares. If the pool expands before the raise, the investors buy into a larger company, so your pre-raise percentage is diluted by the pool increase.
A pool created or expanded after the raise may put the dilution on the company or the founders, depending on the term sheet. Read the option-pool line that applies before the raise, not just the total pool. A total pool hides the timing that changes your percentage before the new money arrives.
The two-number check takes one minute
The check is short. Each item is a line you can find in a term sheet, a 409A, or a cap table. Each one tests a different way the raise can change your share.
- Find the new round price per share and your last 409A price per share. A round price above the 409A is a valuation step up; a round price below it means you should ask what happens to your strike.
- Find the option pool line that applies before the raise. A pool created or expanded before the raise dilutes your ownership before the new investors buy.
- Compare your option strike to the new round price. A lower strike than the round price has value; a higher strike is above the round price and has less value.
- Check whether the term sheet changes your strike, adds protection against dilution, or converts your options into preferred shares, which rank ahead of common stock.
- Ask for the cap table before and after the pool adjustment. The percentage change is the number that matters.
A round price above your last 409A and a pool that is not expanded at your expense make the raise more likely to help your equity. A failure on either number can still be good for the company and bad for your option value. The cap table before and after the pool adjustment is where you see the result.
