Secondary share sales at high-growth startups are undergoing a quiet rewrite. What began as headline-grabbing founder cash-outs during the ZIRP era is increasingly being recast as a people strategy, with tenders designed to keep engineers and operators from bolting. The new playbook aligns liquidity with retention, not windfalls, and it is reshaping how private companies compete for scarce talent.
How the New Liquidity Playbook Is Reshaping Startups
Recent tenders at younger, fast-scaling companies point to the shift. AI software startups have extended liquidity windows to broad employee bases, matching or closely tracking their latest primary-round valuations. One sales automation company invited most staff to sell a portion of vested equity at a valuation that later climbed again in a follow-on tender. A developer tools rival to Atlassian executed a program at its Series C price, and a voice AI unicorn authorized a nine-figure sale for employees as its valuation doubled from the prior round.
These deals look nothing like the 2021-era optics of founders extracting hundreds of millions ahead of unproven business models. Boards are now pushing for broad participation, caps by seniority, and eligibility tied to tenure. The aim is straightforward: give high-impact employees enough liquidity to de-risk life milestones while keeping their upside intact.
The Data Behind the Pivot to Retention-Focused Secondaries
The structural drivers are well documented. PitchBook and NVCA reported that venture-backed exits plunged in 2023, with total exit value a fraction of 2021’s peak, leaving DPI under pressure for many funds. Even as the IPO trickle resumed in fits and starts, late-stage companies have largely opted to stay private longer, preserving control over pricing and disclosure.
At the same time, private-share marketplaces such as Forge Global and Carta have highlighted rising interest from both buyers and sellers, and a narrowing gap between last-round valuations and secondary clearing prices through 2024. Company-run tenders, which offer cleaner mechanics and better information symmetry than one-off brokered sales, have become a larger share of total liquidity events on platforms that track such activity.
Talent dynamics amplify the trend. Compensation surveys from firms like Aon and Mercer show cash pay leveling off after the 2021 spike, while equity remains the differentiator for top-tier AI and infrastructure talent. Competing with employers that routinely run tenders—such as OpenAI and SpaceX—has nudged private peers to follow suit or risk attrition of their most valuable contributors.
How Today’s Tenders Are Structured to Drive Retention
Modern tenders take a more disciplined shape than the last cycle’s founder-driven secondaries. Common features include:
- Broad eligibility with guardrails: Participation typically extends from senior ICs through leadership, with 10–25% caps on vested holdings and higher limits for long-tenured staff. Founders often face stricter caps or deferrals.
- Pricing near the last primary round: Boards aim to avoid speculation, anchoring tenders to the most recent preferred round with a modest discount or parity, minimizing valuation gamesmanship.
- Proration and transparency: If demand exceeds supply, participation is prorated. Companies provide clear windows, tax briefings, and FAQs to cut down on asymmetry and rumor.
- RSU and option nuances: For RSUs with double-trigger vesting, tenders may coincide with partial settlement events. For ISOs and NSOs, finance teams flag AMT exposure, 83(b) election timing, and QSBS eligibility where applicable. Several late-stage companies also extend post-termination exercise windows to reduce forced early exercises.
Retention Gains and Second-Order Risks for Private Firms
The upside is tangible. Even modest liquidity—enough for a down payment or student loans—can boost morale, lower burnout, and curb poaching. Recruiters report that candidates increasingly ask when and how liquidity is offered, not just what the strike price is. For boards, periodic tenders can reduce the administrative sprawl of ad hoc secondary requests.
But there are trade-offs. Secondary investors warn that robust employee tenders can extend private timelines, further delaying distributions to venture funds and, ultimately, to LPs. As Saints Capital’s Ken Sawyer and other secondary specialists have argued, if tenders become a long-term substitute for IPOs, the ecosystem risks a liquidity loop where employees get cash but LPs wait longer for DPI. That can suppress new fund formation and tighten the very capital spigots startups rely on.
Governance is the safety valve. Best-practice boards link tender eligibility to measurable retention outcomes, cap founder participation, and require alignment with runway and milestone plans. Some also pair tenders with refresh grants or performance-based RSUs to ensure near-term sellers remain engaged for the next leg of growth.
What to Watch Next in Startup Secondary Liquidity
If the IPO market meaningfully reopens, tender cadence and size may normalize, returning secondaries to a bridge rather than a destination. If not, expect semiannual or annual tenders to become a standard perk at unicorns and breakout AI companies, with pricing discipline and governance continuing to tighten.
For employees, the takeaway is to plan ahead: model tax outcomes, understand your company’s transfer restrictions, and weigh the long-term upside you’re giving up. For founders and boards, the challenge is to use tenders as a scalpel, not a sledgehammer—right-sized liquidity that keeps teams bought in while preserving the path to durable, public-market-grade businesses.
The headline is no longer who cashed out, but why. In today’s market, secondaries are most valuable when they function as retention engines, not exit ramps.
