Tech Startups Increasingly Offer Secondary Sales to Retain Employees
Several fast-growing tech startups are increasingly offering secondary sales, also known as tender offers, allowing employees to convert some of their stock into cash. This trend marks a shift from secondary sales primarily benefiting founders to a tool for employee retention, particularly in a competitive market.
In May, AI sales automation startup Clay initiated this trend by allowing most of its employees to sell some of their shares at a $1.5 billion valuation, according to TechCrunch. This offer came shortly after Clay's Series B funding round, making it a rare move for a relatively young company.
Since then, other startups have followed suit. Linear, a six-year-old AI-powered Atlassian rival, completed a tender offer at the same valuation as its $1.25 billion Series C, TechCrunch reported. More recently, ElevenLabs, a three-year-old company, authorized a $100 million secondary sale for its staff at a $6.6 billion valuation, doubling its previous value. Clay also authorized another secondary sale last week, according to TechCrunch.
These secondary sales provide employees with liquidity, allowing them to realize some of the value of their stock options before a potential IPO or acquisition. This can be a significant benefit, especially for employees who have been with the company for a long time and have accumulated a substantial amount of equity.
The trend suggests a growing recognition among startups of the importance of employee retention in a competitive talent market. By offering secondary sales, companies can incentivize employees to stay with the company and continue contributing to its growth.
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