Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Founders Use Tender Offers for Early Liquidity
Transcript
- Lucas: If these conversations are useful for what you're building or running, today we're drilling into a specific liquidity tool that more and more founders are using before they ever get near an IPO or acquisition — the tender offer. Luna: You're talking about those company-run programs where employees and sometimes founders can sell shares to outside investors while the company stays private, right? Lucas: Exactly. And they've become a lot more common. Just last month, Stripe ran a tender offer that let employees sell up to roughly a billion dollars worth of shares at a seventy billion valuation. That's up from the fifty billion valuation they raised at in 2023. Luna: So the company's value increased forty percent in about three years, but they're not rushing to go public. They're using this tender as a pressure valve. Lucas: Right. And that's the key insight — tender offers let founders and early employees take money off the table without forcing a liquidity event like an IPO or a sale. For a company like Stripe, which is profitable and growing, there's no desperate need to go public. But the people who've been there eight, ten years have a lot of paper wealth and maybe a mortgage. Luna: So the tender offer is basically a way to turn some of that paper into cash, while the company stays private and keeps control. Lucas: Exactly. And it's not just for the founders. Typically, these programs are open to all employees, sometimes with limits. Stripe capped it at a certain percentage of shares per person. But the effect is huge for retention — if your employees see a path to liquidity every couple of years, they're less likely to jump ship. Luna: I've heard that some investors actually prefer this. They get to buy shares in a hot private company without waiting for an IPO. And they often get a discount. Lucas: Yeah, secondary buyers like mutual funds and sovereign wealth funds are eager to get into names like Stripe, SpaceX, or OpenAI. In a tender, they're buying from existing shareholders, not the company. So the company doesn't dilute itself — it's just a transfer of ownership. The buyer gets a stake, the seller gets cash. Luna: But there's a catch for the sellers. They have to pay taxes on that sale. And if the company's valuation goes up later, they're leaving upside on the table. Lucas: That's the classic trade-off. You de-risk your personal finances, but you cap your upside. Most financial advisors would tell a founder who already has twenty million in paper wealth: 'Sell ten, keep ten.' It's diversifying. Luna: So what does this mean for the exit timeline? If founders are doing tenders, are they less likely to push for an IPO soon? Lucas: I think it can delay IPOs. If you can get liquidity every eighteen months via a tender, the urgency to go public drops. Especially if the public markets are choppy. Look at the IPO market in early 2026 — it's not frozen, but it's not hot either. Companies like Stripe can wait. Luna: And while they wait, the company can keep building without the quarterly pressure of being public. That's attractive for long-term thinking founders. Lucas: Exactly. But there are risks. Tenders are expensive to run — you need lawyers, auditors, and a secondary broker. And if the company's valuation declines between tenders, employees could be stuck holding shares bought at a higher price. Luna: That happened to some employees at companies that did tenders at peak valuations in 2021 and then saw down rounds later. They sold some shares at a high, but the remaining ones dropped. Lucas: Right. So it's not a panacea. But for a company like Stripe, with strong fundamentals and a clear path to profitability, the risk is lower. They've been disciplined. Luna: Let's talk about the mechanics for a second. How does a typical tender offer work? Who sets the price? Lucas: The company usually hires an investment bank to run a process. The bank solicits bids from institutional investors. Then based on those bids, they set a price range. Employees get to tender shares at that price. The company might also set a maximum amount, like Stripe's billion dollar cap. Luna: So it's a supply-demand mechanism. But the company controls the structure. Lucas: Yes. And they can choose to let all employees participate or limit it to executives. Some companies do tiered programs — more for longer tenure. Others make it universal. Stripe's was open to all full-time employees, which is a strong retention signal. Luna: If you're a founder listening, what's the takeaway? When should you consider a tender offer? Lucas: If you're profitable or have strong revenue growth, and your investors are supportive, a tender can be a great tool. But you need to be confident in your long-term value. If you do a tender at a $70 billion valuation and then two years later you're worth $40 billion, your employees will feel the pain. Luna: So it's about timing and confidence. Do you see more companies adopting this as a regular practice? Lucas: I do. We're seeing companies like SpaceX do tenders annually. And with the IPO market uncertain, I expect more late-stage startups to formalize these programs. Some are even creating regular liquidity windows, like a mini-stock exchange for employees. Luna: That shifts the whole idea of an exit. It becomes less a single event and more a series of liquidity moments over years. Lucas: Exactly. And that changes how founders think about building. They don't have to chase a big exit to feel successful. They can build a generational company and still let their team cash out along the way. Luna: Before we go deeper, Lucas, I want to say — if today's episode gave you a useful framework for thinking about liquidity, this show stays ad-free thanks to listeners who support it at buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a small gesture that keeps us independent. And we genuinely appreciate it. Now, let's talk about what happens after the tender — how does it affect the cap table? Luna: That's a good point. When employees sell to outside investors, the cap table gets more complicated. You have new shareholders who aren't founders or VCs. They might have different expectations about exit timelines. Lucas: Right. Those secondary buyers typically have a seven to ten year fund life, so they can be patient. But they still want an exit eventually. If the company stays private for fifteen years, they might start pushing. Luna: So a tender offer can create a new set of stakeholders who want liquidity. That can actually increase pressure for an IPO down the line. Lucas: Exactly. It's a double-edged sword. In the short term, it relieves pressure from employees. But in the long term, you've sold shares to investors who want a return. So you need to manage that. Luna: Are there any regulatory issues? I know the SEC has rules about general solicitation and private company shares. Lucas: Yes, tender offers have to comply with securities laws. Typically, the company will rely on Rule 144 for resales, or use a Regulation D exemption. There's also Rule 10b5-1 plans if insiders want to sell on a schedule. It's complex, so you need good legal counsel. Luna: But the trend is clear. More companies are using tenders as a liquidity tool. Do you think we'll see a day when a startup goes public only after a decade of employee tenders? Lucas: Some companies are already there. Stripe was founded in 2010, and it's 2026 now. They've done multiple tenders. They might never IPO in the traditional sense, or they might go public via a direct listing. But the point is, they've given employees liquidity along the way. Luna: That seems like a healthier model for everyone. Employees get cash, founders keep control, and investors get access. Lucas: Right. And it aligns incentives. If you know you can sell some shares every year, you're less likely to treat equity like a lottery ticket. You treat it like a real asset, which is what it is. Luna: So for founders building today, the message is: plan for liquidity early. Don't wait for an exit. Lucas: Exactly. Build a system that lets your team share in the upside while you're still building. That's the new playbook.