What Is a Tender Offer? A Guide for Startup Employees

If you follow tech news at all, you've probably noticed a growing number of companies announcing tender offers for their employees. Clay has done two in nine months. ElevenLabs ran one at double their previous valuation. Linear just completed their first. It's becoming a real trend, and if you're a non-founder employee at a startup, understanding how tender offers work could be worth a lot of money to you. Literally.

The Problem With Startup Equity: It's Illiquid

Here's the thing about startup equity: it sounds amazing on paper. You get stock options or shares as part of your comp package, your company keeps raising at higher and higher valuations, and on a spreadsheet, you look like you're doing great.

But you can't pay your rent with a number in Carta. You can't use unvested options to cover daycare or pay off student loans.

This is the trick for employees at private companies. You own a piece of something valuable, but that value is locked up. Unlike public company stock, you can't just sell shares whenever you want. Your equity is illiquid, which is a fancy way of saying it's stuck.

Historically, the only way to unlock that value was to wait. Wait for an IPO. Wait for an acquisition. Wait for some exit event that might be years away, or might never come at all. For a long time, that was just the deal you accepted when you joined a startup.

Tender offers change that equation.

How Do Tender Offers Work for Startup Employees?

A tender offer, in the context of a private company, is a structured secondary sale where employees get the chance to sell some of their vested shares back to the company or to outside investors at a set price. The company coordinates the whole thing. They pick a valuation, partner with investors who want to buy, and open a window (usually a few weeks) where eligible employees can decide whether they want to participate and how many shares they want to sell.

It's not an IPO. The company stays private. You're not selling on the open market. Instead, you're selling directly to investors who want to increase their stake, or to new investors who want in. The company typically sets a cap on how much each person can sell, so you're not cashing out entirely. The price per share is usually tied to the latest valuation, so if your company has been growing, those shares could be worth significantly more than when you received them!

Why Are So Many Startups Offering Tender Offers Now?

A few things are happening. First, companies are staying private much longer than they used to. The path from founding to IPO can easily stretch past a decade now, and employees who joined early shouldn't have to wait that long to see any real return on their work. 

Second, the competition for talent, especially in AI, is fierce. Offering liquidity is a smart retention and recruiting tool. If you're choosing between two offers and one company has a track record of running tenders, that matters (a lot!). 

Finally, the stigma around early liquidity is fading. There used to be a worry that letting employees sell shares would kill motivation or signal a lack of confidence. But the companies doing it most aggressively are reporting the opposite. Clay, the AI sales platform, has run two tenders in nine months, going from a $1.5 billion valuation to $5 billion in that span. Their CEO has been open about the philosophy: when people feel supported and financially secure, they stay longer and build with more conviction. ElevenLabs ran a $100 million tender at $6.6 billion, double their valuation from just nine months prior. Linear took a particularly employee-friendly approach with their first tender, offering a 10-year exercise window and pairing liquidity with extended sabbaticals and equity refreshers as part of a broader program they call "Linear Infinity."

What a Tender Offer Feels Like as a Startup Employee

I've been through a tender offer myself, at Klaviyo before the company went public. Nasdaq Private Market actually did a nice write-up featuring several employees from that tender, and the stories are a good window into how personal these decisions are. I remember the mix of excitement, confusion, and nervousness when it was announced. There was a company-wide meeting where leadership walked through how it worked, and then a scramble to figure out the details: how many shares to sell, what the tax implications were, whether this was the right time.

Some people used the money to buy homes. Some colleagues paid off student loans. The decisions were deeply personal and varied widely from person to person. For me, it was an opportunity to set aside funds to cover my tax bill in the event I wanted to leave the company before it IPO’d, and I did a few months later.

The biggest takeaway I had from that experience is this: if a tender comes up at your company, you should take the time to understand your options. Talk to a financial advisor, especially about the tax side of things, because the difference between handling it well and handling it poorly can be tens of thousands of dollars. Understand what the alternative minimum tax might mean for you. Figure out how much of your net worth is tied up in company stock and whether that concentration makes you comfortable.

If you want to go deeper on how these secondary sales are structured, Gunderson Dettmer published a solid report analyzing nearly 250 tender offer transactions.

Why Tender Offers Matter for the Future of Startup Compensation

Tender offers represent a real philosophical shift in how startups think about the relationship between companies and the people who build them. For a long time, the startup equity model was essentially a lottery ticket: you joined early, you worked hard, you hoped for a big exit. If it happened, great. If it didn't, you were out of luck.

The move toward regular pre-IPO liquidity events, sometimes multiple times per year, signals that the best companies now see equity as something that should deliver value throughout your tenure, not just at the end. That's good for employees. It's good for the ecosystem. And if you're working at a private company right now, it's something worth paying attention to.