VSOP is not an HR topic. It is a cap table topic. The decisions made before the first contract determine how much of the valuation upside founders still hold at exit. What I see regularly when supporting seed and Series A processes: the programme was set up when the first good hire threatened to walk away. The pool size was estimated, not calculated. The first VC asked for an option pool shuffle in the term sheet that nobody saw coming.
Three decisions before the first VSOP contract
When a VSOP programme is set up, who it covers, and how big the pool is, are three interdependent questions. Answering them in the wrong order or skipping one of them buys you problems. Start too early and you allocate equity before it is clear who actually stays until exit. Start too late and you lose the best candidates to companies that already have a structured programme in place.
When is the right moment
VSOP only creates retention when two conditions are met at the same time. An exit is realistic enough that the person takes the notional value of their equity seriously. And the person is likely to stay long enough to actually experience that exit. For employees one and two, these conditions rarely apply.
In practice, VSOP becomes relevant from the moment key hires weigh a decision between an established employer and the startup. That is typically from employee five to ten, not before. Earlier hires are usually brought in through direct equity or founder-like terms, which require their own considerations. Setting up a VSOP programme too early means handing out pool shares before the truly critical roles are filled.
The other common mistake is setting up VSOP after Series A. By then all valuations are fixed. Equity at a post-money valuation of 15 million EUR has a different psychological value for a head of engineering than the same equity at 3 million. Timing shapes perceived value more than the absolute percentage.
Who it covers: employees, advisors, and who gets nothing
Not every role justifies VSOP. And not every person who receives VSOP should get the same terms. Two groups differ fundamentally: employees and external advisors. Contract structure, vesting logic and tax treatment are different for each.
Employees by role
The ranges below reflect what I have seen supporting seed and Series A processes in the German-speaking market. Not a binding market standard, but a usable orientation. The stage is decisive: the earlier the hire, the higher the share. The more central the role to the core business, the more room for negotiation.
| Role | Orientation value | Vesting |
|---|---|---|
| CTO / CPO (very early, near co-founder) | 1–3 % | 4 years, 1-year cliff |
| VP Engineering / Head of Engineering | 0.3–1 % | 4 years, 1-year cliff |
| First senior engineers (hire 5–15) | 0.1–0.5 % | 4 years, 1-year cliff |
| Head of Sales / VP Sales | 0.2–0.5 % | 4 years, 1-year cliff |
| Head of Marketing | 0.1–0.3 % | 4 years, 1-year cliff |
| Regular employees from hire 20+ | 0.05–0.15 % | 4 years, 1-year cliff |
The one-year cliff is standard. Anyone who leaves before the first year leaves with nothing. After that, vesting continues monthly or quarterly over the remaining three years. This protects the startup from the scenario in which someone leaves early and still walks away with a meaningful share of the pool.
Advisors by type
External advisors, industry experts and strategic angels can be included in a VSOP programme without an employment relationship. That sounds obvious but in practice is rarely structured properly. Two points distinguish advisor VSOPs from employee VSOPs significantly.
First, contract design is more flexible. For employees, German labour law sets limits on how far forfeiture clauses for vested shares can reach. For advisors without an employment relationship, that limit does not apply. The contract can be tied more tightly to actual contribution.
Second, tax treatment differs. Payouts from advisor VSOPs are not treated as employment income. No wage tax and no social security obligation apply. What applies in a specific case depends on the actual contract design and belongs with a tax advisor, not in a quick founder decision.
| Advisor type | Orientation value | Vesting |
|---|---|---|
| Strategic angel / VC door opener | 0.1–0.5 % | 1–2 years, no or 3-month cliff |
| Operator / industry expert | 0.05–0.2 % | 1–2 years |
| Domain expert, occasional involvement | 0.05–0.1 % | 12 months, no cliff |
Who gets nothing
Who should not receive VSOP: short-term project service providers, advisors who are likely to leave before exit, and roles without long-term commitment. A programme that includes too many people creates two concrete problems. The pool runs empty earlier than planned. And future VCs see a fragmented participation circle in the data room that raises questions.
How big should the pool be, and what the option pool shuffle costs
Pool size is the decision where I see the biggest differences in founder preparation. Reserving too little does not become a problem immediately. It becomes a problem at the Series A term sheet. VCs typically require an available option pool of 10–15% post-money. If the existing pool is smaller, they demand an increase before the investment. The consequence: this increase dilutes existing shareholders, not the new investor.
An example with concrete numbers. Pre-money valuation 8 million EUR, 2 million EUR new capital in the round.
| Scenario | Pool before round | Adjustment required | Founder share after round |
|---|---|---|---|
| Pool too small, increase to 12% required | 8 % | Yes, before closing | approx. 62 % |
| Pool correctly sized | 13 % | No | approx. 68 % |
Six percentage points sound minor. At an exit at 30 million EUR, that is 1.8 million EUR difference for the founders. The option pool shuffle is not an exception. It is a standard tool many VCs use routinely. Founders who know about it and size the pool correctly in advance are in a different negotiating position.
A VSOP programme that is fully documented at the time of due diligence, with clear pool size, known recipients and consistent terms, is a positive signal in the data room. It shows that the founders understood the cap table consequences before the VC had to explain them.
I recommend planning for 10–13% pre-money before Series A and keeping 3–5% of that as reserve for hires after the round. Do not allocate everything immediately. A programme that is already 90% used up at the term sheet signals to the lead investor that there is no room for their growth team. That is not a strong negotiating argument.
VSOP for employees or convertible notes for advisors
Founders who want to bring in advisors have two instruments to choose from, each following a different logic. VSOP without capital binds expertise and time. No cash outflow for the startup, payout only at exit. That is the right instrument for someone who brings network and operational experience but does not want to invest.
The convertible note follows a different logic. It brings capital and converts into equity at the next funding round. For advisors who want to invest and at the same time deliver operational value, the two instruments are not mutually exclusive. A strategic angel can hold a convertible note and receive VSOP shares in parallel, when their contribution justifies both. That is rarer than it sounds, but it happens.