Secondary sales shift from founder windfalls to employee-retention tools | TechCrunch

"In May, AI sales automation startup Clay said it was allowing most of its employees to sell some of their shares at a $1.5 billion valuation. Coming just months after its Series B, Clay's offer of liquidity was a rarity in a market where tender offers, as these types of secondary transactions are known, were still uncommon for relatively young companies."

"Since then, several other newer, fast-growing startups have allowed their staff to convert some of their stock into cash. Linear, a six-year-old AI-powered Atlassian rival, completed a tender offer at the same valuation as the company's $1.25 billion Series C. More recently, the three-year-old ElevenLabs authorized a $100 million secondary sale for staff, at a valuation of $6.6 billion, double its previous value."

"And just last week, Clay, which has tripled its annual recurring revenue (ARR) to $100 million in one year, decided it was again time for its employees to cash in on the company's fast growth. The eight-year-old startup announced that its staff can sell stock at a valuation of $5 billion, a more than 60% increase from its $3.1 billion valuation announced in August."

"These secondary sales at increasingly higher valuations for young, perhaps still-unproven companies may initially appear to be a premature "cash out" reminiscent of the 2021 bubble. The most infamous example of that time was Hopin, whose founder, Johnny Boufarhat, reportedly sold $195 million worth of his company's stock just two years before the company's assets were sold for a tiny fraction of its peak $7.7 billion valuation."

Clay allowed most employees to sell shares at a $1.5 billion valuation shortly after its Series B, an uncommon move for a young company. Other startups followed with employee secondaries: Linear matched its $1.25 billion Series C valuation and ElevenLabs authorized a $100 million staff sale at $6.6 billion. Clay later tripled ARR to $100 million and opened another employee tender at a $5 billion valuation, a 60% increase from $3.1 billion. These recent tender offers provide liquidity to employees rather than chiefly benefiting founders, contrasting with many 2021-era secondary deals.

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