Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Founders Use Tender Offers for Pre-Exit Liquidity
Transcript
- Lucas: If these conversations are useful for what you're building or running, we've got a simple way you can help keep them going. A couple of dollars a month is genuinely what keeps these shows ad-free — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, and it really does make a difference. Every contribution adds up. Lucas: Alright — so today we're talking about tender offers. Not the kind you see in M&A where a company makes a public offer to buy shares, but the kind that startups use to give founders and employees some liquidity before an actual exit. Luna: And we have a great recent example. Wayve, the autonomous driving startup, just launched an $85 million employee tender offer at an $8.5 billion valuation. Lucas: Right. That's a big number, but what's interesting is the structure. Tender offers let employees sell some of their shares to a third party — usually a venture capital firm or a secondary market buyer — without the company having to do a full IPO or get acquired. Luna: So it's a way to turn paper wealth into actual cash before the company goes public. For early employees who've been there five, six, seven years, that can be life-changing. Lucas: Exactly. And the company benefits too. It can be a retention tool — employees see a path to liquidity, so they're less likely to jump ship. But there are trade-offs. Luna: What kind of trade-offs? Lucas: Well, first, the valuation. Wayve's tender is at $8.5 billion, which is the same as their last funding round. That's a flat round, essentially. If the company had raised at a higher valuation, employees might feel they're selling too cheap. Luna: And if the valuation is lower than the last round, that sends a negative signal to the market. You don't want to look like you're marking down the company. Lucas: Right. So companies often try to price tenders at or above the last round. But there's also a cap on how much employees can sell — usually 10 to 20 percent of their holdings. It's not a full exit. Luna: Which makes sense. You don't want your key engineers cashing out and losing motivation. But it does mean founders have to think carefully about who gets to participate and how much. Lucas: And there's the tax angle. Selling shares in a tender is a taxable event. Depending on the jurisdiction, employees might owe capital gains tax immediately. That's different from an IPO, where you can hold and defer taxes. Luna: So it's not just free money. You have to plan for the tax hit. Lucas: Exactly. But for many, it's worth it. Especially in a market where IPOs are uncertain. Look at the broader environment — we're in July 2026, and the IPO window has been choppy. Companies like Wayve might not go public for another year or two. A tender offer gives employees liquidity now. Luna: And it's not just employees. Founders can also participate in tender offers, though they often have different restrictions. Some VCs require founders to hold most of their shares until the exit. Lucas: That's a good point. Founders have to negotiate their liquidity rights early, in the term sheet. If you're a founder listening, you should know that tender offers are usually structured as a company-wide program, but you can carve out a larger portion for yourself if you plan ahead. Luna: So how does a typical tender offer work in practice? Walk us through the mechanics. Lucas: Sure. First, the company decides to do a tender — usually in consultation with its board and major investors. They set a price, a total pool of shares to be purchased, and a window — say, 30 days. Employees submit offers to sell a certain number of shares. The company may prorate if demand exceeds supply. Luna: Then a buyer — like a secondary fund — steps in to purchase those shares. The company facilitates the transaction but doesn't usually buy the shares itself, unless it has cash on hand. Lucas: Right. The company's role is administrative. They handle the paperwork, the compliance, and they make sure employees understand the tax implications. Some companies even offer financial planning sessions. Luna: That's smart. Because if an employee sells without understanding the tax consequences, they could end up with a nasty surprise at tax time. Lucas: Absolutely. And there's another wrinkle: the tender offer can affect the company's cap table. New investors come in as shareholders, and that might change the dynamics for future fundraising. Some VCs prefer not to have too many small shareholders on the cap table. Luna: So it's not just a simple liquidity event. It has ripple effects. Lucas: Exactly. But for many startups, it's the best option available. IPOs are expensive and time-consuming. Acquisitions are uncertain. A tender offer lets you reward employees and give them a taste of liquidity without committing to a full exit. Luna: And it can also help with retention. If employees see that the company is willing to give them liquidity, they might be more loyal. But if the tender is too small or the price is too low, it can have the opposite effect. Lucas: Yeah, it's a delicate balance. The Wayve tender at $8.5 billion is a good example because they're a high-profile company with a lot of employee equity. They're giving employees a chance to cash out a bit, but not too much. And they're doing it in a way that doesn't signal distress. Luna: So for founders who are considering a tender offer, what's the key takeaway? Lucas: Plan early. Talk to your investors about what kind of liquidity programs you want to offer. And think about the message it sends to the market. A tender offer at a flat or up round is a positive signal. A down round tender can be a warning sign. Luna: And for employees, it's all about understanding your own financial situation. Don't just sell because everyone else is. Think about your tax bracket, your long-term goals, and whether you believe in the company's future. Lucas: Right. It's a personal decision. But having the option is a huge benefit. A decade ago, most startup employees had to wait for an IPO to get any liquidity. Now, tender offers are becoming standard. Luna: And that's a good thing for the ecosystem. It makes startup employment more attractive and helps founders retain talent. Lucas: Absolutely. So if you're a founder or an employee at a late-stage startup, pay attention to tender offers. They might be your best shot at liquidity before the big exit. Luna: And if you have questions, drop us a line. We love hearing from listeners. Lucas: That's it for today. Thanks for listening, and we'll see you next time on The Startup Exit Podcast.