Note in particular how option pools dilute founders, not investors. My understanding is that is actually negotiable, but it is an easy way for unsavvy founders to have the valuation they negotiate not mean what they think it means. (Ditto not understanding what Pre- and post-money valuations mean.)

Example: suppose I, a clueless tech guy, am negotiating with a savvy and aggressive money-guy. Assume for sake of argument we're raising $1 million, and my naive thoughts are that "The company is worth $5 million."

Me: "The company is worth $5 million."

Him: "We can totally work with a $5 million post-money valuation."

Me: "Great."

Almost everyone on HN knows I screwed myself. You think I just priced the company down to $4 million, right? Yeah, even worse.

Him: "So you know, it is customary for companies in Silicon Valley to make generous equity grants to attract and retain employees."

Me: "Oh totally."

Him: "The standard is 20%. You could get a lower number, but honestly, you'd look like a greedy bastard out to screw his employees, and our firm would probably not do business with you."

Me: "Oh, I am not greedy."

Him: "Great! So, $5 million post minus $1 million investment leaves $4 million Pre, reserving 20% of the post for employees, means you have $3 million in equity in this company."

Me: "Waitwaitwait, that sounds..."

Him: "That sounds like I just made you a millionaire. Son, you don't want to be unreasonable here. This is how business has always been done in the Valley. Besides, 100% of nothing is nothing. Don't worry about a bit of dilution, it happens, worry about that huge pile of money you'll have when you IPO."

Edit: I originally wrote it as 20% of the Pre, but checking with VentureHacks suggests that it would probably be calculated as 20% of the post. Easy to screw this stuff up, right? It's almost like it is designed that way...