Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Founder Liquidity Pools Are Reshaping Pre-IPO Exits
Transcript
- Lucas: SpaceX went public at a hundred and thirty-five dollars per share, and by the time the IPO priced, some early employees and investors had already been selling shares for years through what are called founder liquidity pools. Luna: Right — so the IPO wasn't their first liquidity event. It was more like the final exit. Lucas: Exactly. And that's becoming a quiet but powerful trend in private markets. More late-stage founders and early employees are using structured secondary sales — often managed by platforms like Forge Global or EquityZen — to cash out a portion of their stock before the company ever rings a bell. Luna: If these conversations are useful for what you're building or running, a handful of listeners help keep the show going through buy me a coffee dot com slash fexingo. That's what lets us stay ad-free and dig into stuff like this. Lucas: Yeah, and we appreciate that. So today we're going to look at how these liquidity pools actually work, using SpaceX as the backdrop. Luna: And there's a real tension here — do you take early cash, or hold out for the IPO pop? Lucas: Right. And the data on that is mixed. SpaceX's IPO raised eighty-five point seven billion dollars, making it the biggest ever. But if you sold shares at fifty dollars in a 2022 tender offer, you left a lot on the table versus the IPO price of a hundred and thirty-five. Luna: That's a massive gap. But the flip side is liquidity — you might need the cash to start another company, buy a house, or just de-risk. Lucas: Exactly. And the secondary market has matured a lot. Forge Global, for example, lets pre ipo companies run structured tender offers where a pool of buyers — often institutional investors — commit to buying shares at a set price. The company controls the timing and the allocation. Luna: So it's not like dumping shares on a random forum. It's a formal process. Lucas: Completely. The company decides the size, the price range, who can participate. And employees and early investors get a chance to sell a portion of their holdings. SpaceX did several of these — in 2020, 2022, 2023 — each time at increasing valuations. Luna: It must create a weird dynamic inside the company. Some people are getting rich early, others are holding out for more. Lucas: It does. And there's a retention risk. If a key engineer cashes out millions, do they still have the same motivation? That's why some companies cap how much you can sell — maybe twenty to thirty percent of your vested shares. Luna: So you keep some skin in the game. But for founders, it's a powerful tool. You can create liquidity without an IPO timeline. Lucas: Right. And that's relevant for a lot of companies right now. Look at the ARK Innovation ETF — it's up nearly six percent in the past week. That suggests risk appetite is coming back. Coinbase is trading at a hundred and seventy dollars, up over nine percent in five days. The market is warming up to tech again. Luna: Which means more companies might consider going public — and that makes the pre ipo liquidity question even more important. Lucas: Exactly. So let's talk about the mechanics. A typical founder liquidity pool works like this: the company hires a secondary market platform, say Forge or EquityZen. They set a date window — maybe two weeks — and employees indicate how many shares they want to sell. Buyers, often institutional funds, bid on the shares. Luna: And the price is set by that auction, right? So it's market-driven, but within a controlled environment. Lucas: Yes. And the company usually has the right to accept or reject the final price. They don't want employees selling at a discount that signals weakness. Luna: That's smart. But for the founder, the big question is timing. Do you do a tender offer at a forty billion valuation, or wait for the IPO at eighty billion? Lucas: And the answer depends on your personal risk tolerance and your goals. Some founders want to diversify — they have all their net worth tied up in one company. A liquidity pool lets them cash out a chunk without losing control. Luna: And it also sends a signal to the market. If employees are selling, it might look like a lack of confidence. But if it's structured as a planned liquidity program, it can be framed as a benefit. Lucas: Exactly. Companies like Palantir and Airbnb did this before their IPOs. Palantir, ticker P-L-T-R, is trading at a hundred and thirty-four dollars today — up one point six percent this week. They ran tender offers for years. Luna: So it's becoming standard practice. And for investors, it's a way to get into high-growth companies before the IPO. Lucas: Right. Some of these institutional buyers are essentially using liquidity pools as a private-market entry point. They buy shares at a discount to the future IPO price, and they hold through the lockup. Luna: But there's risk too. The company might never IPO, or the valuation could drop. Just ask employees of companies that did secondary sales at peak valuations in 2021 and then saw down rounds. Lucas: Absolutely. And that's where the structure matters. Some liquidity pools include downside protection — like a minimum price guarantee from the buying syndicate. Others are straight auctions. Luna: So if you're a founder listening, what should you consider before setting up a liquidity pool? Lucas: First, pick the right platform. Forge and EquityZen are the two biggest, but there are smaller players too. Look at their track record with companies in your sector. Second, think about the size — you don't want to flood the market. Usually five to fifteen percent of outstanding shares is the sweet spot. Luna: And you want to communicate clearly with employees. Set expectations about pricing, timing, and tax implications. Lucas: Yes. And consider doing it before a big catalyst — like a major product launch or a funding round — so the price reflects positive momentum. SpaceX did their 2023 tender offer after a successful Starship test. Luna: That's a smart move. And for employees, it's a chance to realize some value without waiting years for an IPO that might not come. Lucas: Or that might come at a lower valuation. The market is unpredictable. Right now, the NASDAQ is up this week, but we've seen how fast sentiment can shift. Having a liquidity option gives you flexibility. Luna: So the old model was: work for years, IPO, wait through lockup, then sell. The new model is: sell gradually, de-risk, and treat the IPO as the final chapter, not the first. Lucas: Exactly. And I think we'll see more companies adopt this, especially as the private market stays private longer. The average time to IPO is now over ten years. Founders and employees need liquidity solutions that don't require a public listing. Luna: It's a fundamental shift in how we think about startup exits. And it puts more power in the hands of the people who built the company. Lucas: Right. And that's a good thing. The question for the rest of 2026 is: will the trend accelerate as more mega-companies like SpaceX go public? Or will the secondary market become so efficient that the IPO itself becomes less necessary? Luna: That's a fascinating question. And one we'll keep watching. Lucas: Absolutely. Thanks for listening.