Secondary sales evolve from founder payouts to employee perks

Last week, AI sales automation startup Clay announced that its staff can sell stock through a tender offer—a secondary transaction where employees sell stock—at a $5 billion valuation. This represents a more than 60% increase from the company’s previous $3.1 billion valuation announced in August, coming as Clay tripled its annual recurring revenue (ARR) to $100 million in one year. The transaction highlights a broader market trend where fast-growing startups are using secondary sales to provide liquidity to employees rather than just founders. Recent examples of this trend include:

• Clay: Allowed employees to sell shares at a $1.5 billion valuation in May, before its latest option to sell at a $5 billion valuation.
• Linear: The AI-powered Atlassian rival completed a tender offer at a $1.25 billion valuation.
• ElevenLabs: The AI startup authorized a $100 million secondary sale for staff at a $6.6 billion valuation.

These secondary sales at higher valuations for young companies may initially appear to be a premature cash-out reminiscent of the 2021 bubble era. During that Zero Interest Rate Policy (ZIRP) era, secondary transactions frequently focused on founder windfalls. The most prominent example was Hopin, where founder Johnny Boufarhat reportedly sold $195 million worth of stock before the company’s assets were eventually sold for a fraction of its peak $7.7 billion valuation. Today’s market structure, however, is distinct. Instead of concentrating payouts at the top, current transactions are structured as employee-wide tender offers designed to distribute gains across the workforce.

Investors and founders view this shift toward employee-wide liquidity as a healthy tool for recruiting and retention as companies stay private longer. Clay co-founder Kareem Amin previously stated that the goal of these offers is to ensure gains do not just accumulate to a few people. Nick Bunick, a partner at the secondary-focused venture capital firm NewView Capital, noted that he has not seen any drawbacks to these transactions yet. “A little liquidity is healthy, and we’ve certainly seen that across the ecosystem,” Bunick said.

However, some secondary market experts warn of potential second-order effects if these transactions become a long-term substitute for initial public offerings (IPOs). Ken Sawyer, co-founder and managing partner at secondary firm Saints Capital, noted that while the trend is positive for employees, it enables companies to stay private longer. This dynamic reduces liquidity for venture investors, which in turn creates a challenge for limited partners (LPs)—the institutional investors that back venture capital funds.

Why it matters

Secondary sales are shifting from founder-focused payouts to employee-wide tender offers. Startups are increasingly using these transactions as recruiting and retention tools to satisfy talent while remaining private for longer periods.