Employee Tender Offers: How Secondary Sales Evolved from Founder Windfalls to Strategic Retention Tools

In May, AI-powered sales automation platform Clay announced it would enable the majority of its workforce to liquidate equity positions at a $1.5 billion valuation. Following closely after its Series B funding round, Clay's liquidity provision represented a notable shift in a market where tender offers—structured secondary transactions—remained relatively uncommon for early-stage ventures.

Since that announcement, several high-growth startups have implemented similar employee liquidity programs. Linear, a six-year-old AI-enhanced project management platform competing with Atlassian, executed a tender offer matching its Series C valuation of $1.25 billion. More recently, three-year-old voice AI company ElevenLabs authorized a $100 million secondary sale for employees at a $6.6 billion valuation—representing a 100% increase from its previous funding round.

Last week, Clay—having tripled its annual recurring revenue (ARR) to $100 million within twelve months—initiated a second employee tender offer. The eight-year-old company set the transaction valuation at $5 billion, marking a 61% increase from its $3.1 billion valuation announced in August.

Distinguishing Current Trends from 2021 Market Dynamics

These secondary transactions at escalating valuations for relatively young companies might initially appear reminiscent of the 2021 market bubble, when premature liquidity events became commonplace. The most notable example from that period was Hopin, where founder Johnny Boufarhat reportedly liquidated $195 million in equity just two years before the company's assets were acquired for a fraction of its peak $7.7 billion valuation.

However, a fundamental distinction exists between the 2021 boom and current market practices. During the zero-interest-rate policy (ZIRP) era, secondary transactions predominantly provided liquidity exclusively to founders of high-profile companies. In contrast, recent transactions from Clay, Linear, and ElevenLabs are structured as employee-wide tender offers.

While venture investors generally disapprove of the substantial founder payouts characteristic of 2021, the current emphasis on employee-accessible tender offers receives significantly more favorable reception.

Strategic Value of Employee Liquidity Programs

"We've facilitated numerous tender offers, and I haven't observed any drawbacks yet," stated Nick Bunick, Partner at secondary-focused venture capital firm NewView Capital. As companies extend their private market tenure and talent acquisition intensifies, enabling employees to convert paper gains into liquid assets serves as a powerful mechanism for:

• Talent recruitment
• Employee morale enhancement
• Workforce retention

"Moderate liquidity is beneficial, and we've consistently observed this across the ecosystem," Bunick noted.

During Clay's initial tender offer, co-founder Kareem Amin explained that the primary objective was ensuring that "value creation doesn't exclusively accrue to a limited group of stakeholders."

Competitive Dynamics and Market Implications

Several high-growth AI companies recognize that without providing early liquidity opportunities, they risk losing top talent to publicly-traded companies or mature private entities like OpenAI and SpaceX, which regularly conduct tender sales.

Despite the apparent benefits of allowing startup employees to realize financial returns, Ken Sawyer, Co-founder and Managing Partner at secondary firm Saint Capital, identified potential unintended consequences:

"While this is undoubtedly positive for employees, it enables companies to extend their private market presence, reducing liquidity for venture investors—which presents challenges for limited partners," Sawyer explained.

In essence, relying on tender offers as a long-term alternative to initial public offerings (IPOs) could create a problematic feedback loop within the venture ecosystem. If limited partners don't receive cash distributions, they become increasingly reluctant to commit capital to venture capital firms that invest in startups.