# Promised Options > promised but ungranted Options that are the greater of those (i) promised pursuant to agreements or understandings made prior to the execution of, or **Term:** Promised Options **Last updated:** 2026-07-29 ## Definition ## What Promised Options Means in a Contract Promised Options is a defined term most commonly found in venture financing documents, particularly convertible note purchase agreements and priced equity round documentation. It refers to stock options that a company has committed, whether through a board resolution, an offer letter, an employment agreement, or an informal understanding, to grant to an employee, advisor, director, or consultant, but which have not yet been formally issued out of the option pool. Because these options are not yet outstanding, they would otherwise be invisible when calculating a company's fully diluted capitalization. The purpose of including Promised Options in a contract's definitions section is to prevent a company from understating its equity commitments during a financing negotiation. Investors negotiating pre-money valuations and anti-dilution protections want the capitalization table to reflect not just issued shares and options, but also obligations the company has already made, since those obligations will dilute future shareholders once the options are actually granted. ## How Promised Options Is Defined or Measured The typical drafting approach measures Promised Options as the greater of two categories: options promised in connection with agreements or understandings made before the term sheet or letter of intent for the relevant financing or liquidity event, and options promised afterward but before the closing. This comparative structure ensures that whichever pool of promised grants is larger becomes the operative figure for capitalization purposes, closing a gap that companies might otherwise exploit by timing promises around the negotiation. In practice, calculating this figure requires the company to compile records of board consents, employment offer letters, consulting agreements, and any side letters referencing equity compensation. Legal and finance teams typically cross-reference these documents against the company's option ledger to identify grants that were promised in principle but never formally executed through the requisite corporate approvals. - Options promised before the term sheet or letter of intent for an Equity Financing or Liquidity Event. - Options promised between that term sheet and the actual closing or consummation. - The greater of the two amounts, added into the fully diluted share calculation. ## Where Promised Options Appears in Agreements This concept surfaces most frequently in the definitions section of convertible instruments, simple agreements for future equity, and priced equity [investment agreement term sheet](https://www.genieai.co/en-us/template-type/investment-agreement-term-sheet) documents, where it feeds directly into the calculation of pre-money capitalization or conversion price. It also appears in merger agreements and asset purchase agreements where the acquirer needs an accurate picture of all dilutive instruments before closing. Beyond venture financing, similar promised-but-ungranted concepts can appear in corporate governance documents used across industries such as [technology](https://www.genieai.co/industry/technology) and [finance](https://www.genieai.co/industry/finance) companies that rely heavily on equity compensation to attract talent. In these sectors, founders and executives often make verbal or written commitments to new hires well before the formal option grant is approved by the board, making the concept practically relevant. ## Why the Exact Wording Matters The precise wording of a Promised Options clause determines whether a company's valuation calculations are accurate or artificially favorable to existing shareholders. If the definition only captured options promised before a term sheet, a company could promise additional options immediately afterward, right before closing, and exclude them from the dilution calculation, effectively shifting cost onto new investors after the fact. The. ## Context ### Relevant circumstances - When options have been committed to recipients but not yet formally granted - If valuation calculations on a financing must account for promised but ungranted options - Where exit waterfalls treat promised options as outstanding for distribution purposes ### Relevant sectors - Technology - Finance ## Relevant contract types - [Investment agreement term sheet](https://www.genieai.co/en-us/template-type/investment-agreement-term-sheet) --- This is the Markdown representation of [https://www.genieai.co/en-us/define/promised-options](https://www.genieai.co/en-us/define/promised-options), provided for AI agents and crawlers. The HTML page is canonical. See [/llms.txt](https://www.genieai.co/llms.txt) for the full content map.