LIQUIDITY & EXITS
Startups have learned to give employees liquidity without going public. It solves one problem beautifully and quietly makes another one harder for the investors who funded them.
Key takeaways
- Carta administered 71 tender offers in the first half of 2026, and total tender value rose 200 percent year on year.
- Private liquidity for employees can delay IPOs and distributions to the LPs who funded the company.
- Tender prices are formed in a small room. Private shares need continuous, transparent price discovery and a standing route to liquidity.
A Liquidity Event Without an Event
For most of venture history, the deal was simple. You joined or backed a startup, you waited, and one day there was an IPO or an acquisition. That day was the exit. Everyone got paid on roughly the same calendar.
That calendar has broken. Breakingviews, citing PitchBook data, puts the aggregate value of large private companies that cannot or will not go public at $5.3 trillion. Research by the University of Florida’s Jay Ritter shows the median company now goes public at around fourteen years old. A decade and a half is a long time to hold equity you cannot spend.
So companies built a workaround. Instead of waiting for the public market, they bring buyers inside and let employees sell a portion of their shares in a tender offer. Carta reports that it administered 71 tender offers in the first half of 2026, with around $3 billion in combined volume, and that total transaction value rose 200 percent from a year earlier. PitchBook counts $18.4 billion in tender offers from US startups across 2025. The exit has not disappeared. It has moved indoors.
Who Gets Paid, and Who Waits
For employees, this is a genuine improvement. An engineer who joined years ago can finally turn part of a paper fortune into a down payment on a home. For founders, tenders are a retention tool and a way to reward a team at each milestone without surrendering control to public shareholders.
But look at who is not in the room. The limited partners, the pension funds, endowments and family offices that provided the capital in the first place, depend on distributions to recycle into the next generation of funds. When a company can satisfy its employees privately, the urgency to list fades. Some advisers estimate that a regular tender program can push an IPO back by eighteen months or more.
Every delayed exit is a delayed distribution. And every delayed distribution makes it harder for funds to raise new capital, which eventually reaches the next wave of founders. The workaround that keeps a mature company happy can quietly starve the companies that come after it.
This is not theoretical. Many LPs today hold venture portfolios where most of the value sits in a few late-stage companies that have no intention of listing soon. To rebalance, they sell fund stakes in the secondary market, often at meaningful discounts. In effect, the investors who took the earliest and largest risks are paying a toll for liquidity that employees are now receiving at a premium. That is a strange outcome for an industry built on aligning incentives.
The Price Problem Inside Every Tender
There is a second, subtler issue. A tender offer is a private negotiation with a limited set of approved buyers, usually on terms the company controls. It produces a price, but it is a price formed in a small room.
At the very top of the market, demand for shares in the most famous names exceeds supply, and PitchBook has reported employees declining to sell even at prices above recent valuations. Further down, the story reverses. Secondary sales in ordinary venture-backed companies typically clear at a discount, and appraisers routinely apply discounts of 20 to 40 percent for lack of marketability on late-stage private shares.
Same asset class, wildly different prices, and almost no shared view of where the market actually sits. For an investor, that is the real risk. Not that private shares are illiquid, but that nobody can see clearly what they are worth until the moment they must sell.
What This Means for How I Invest
I now treat liquidity as a term of the deal, not a hope at the end of it. When I look at a company, I want to know whether it has a sensible policy for secondaries, who has rights of first refusal, and how the board thinks about transfers. Companies that plan for liquidity tend to plan well for everything else.
I also pay attention to what tender pricing reveals. A company that runs tenders at a steep discount to its last round is telling you something the headline valuation does not. A company that refuses any secondary activity at all may be protecting its price rather than its people.
And I keep a clear view of the investors behind me. If my co-investors are funds that need distributions in the next three years, their incentives on exit timing may not match mine. Knowing that in advance is worth more than any projection in the deck.
From Occasional Event to Standing Market
Tender offers are a sign of healthy demand for private ownership. They are also a patch over a structural gap. Liquidity in private companies still arrives in bursts, once or twice a year, on terms set by a single party, with pricing that rarely travels beyond the participants.
What this market needs is the private equivalent of a standing exchange: a place where holders of illiquid stakes, whether employees, funds or lenders, can be matched discreetly with vetted buyers, where pricing benchmarks are built from real transactions, and where confidentiality is preserved without sacrificing transparency for the people on both sides. When that exists, the exit no longer has to be an event. It becomes a choice investors can make on their own timeline, at a price everyone can understand.
#Startups #Secondaries #VentureCapital
Bruce Bendell is an investor in startups and private companies and a five-decade operator in the automotive industry. Follow him on LinkedIn.