An option pool is a portion of a company's equity that is set aside for future employees or other potential equity recipients. It is typically created when a company raises venture capital funding and is included as part of the company's pre-money valuation. The option pool is intended to provide equity incentives to attract and retain talented employees, and is typically structured as stock options that can be exercised by the employees at a later date. The size of the option pool is typically determined as a percentage of the company's outstanding shares, and is typically around 10-20% of the total number of shares.