What is a Tender Offer?

A tender offer is a liquidity event where a company or investor offers to buy shares from existing shareholders (typically employees and early investors). For startup employees, it often means the chance to sell some of your vested stock options or shares before an IPO or acquisition.

Tender offers usually happen in private companies and are company-approved. If you’ve worked at your company long enough to vest equity, you may be invited to participate in one. They’ve also become more popular in recent years as private companies stay private longer and IPO timelines extend—giving employees fewer natural liquidity opportunities.

How Does a Tender Offer Work In a Startup?

1. The Offer: The company announces that certain shareholders, often current or former employees, can sell a portion of their vested shares.
2. The Terms: The offer usually comes with a set purchase price (often based on the most recent 409A valuation or latest funding round), a deadline, and restrictions (e.g., you can only sell 10-20% of your shares).
3. Your Decision: You decide whether to sell, how many shares to sell (within limits), or to hold.
4. Payout: If you sell, you'll receive cash after the tender closes. There may be tax implications depending on your situation.

Tender offers are not open-ended. They typically last a few weeks and may not come around again for years. Companies use tender offers to give early employees and investors a way to access liquidity, often as a retention incentive. Participation is entirely optional

Should You Sell in a Tender Offer?

That depends. Some employees sell to de-risk or pay off expenses. Others choose to hold their shares and go long. Things to consider:

• How much are you allowed to sell? (Often 10–30% of vested equity)
• Do you believe the company has more upside?
• What are the tax implications? (Are you triggering income or capital gains?)
• Do you need liquidity now?

Some employees split the difference—selling a portion and holding the rest.

At ESO Fund, we help employees who don’t sell in a tender offer and want to afford exercising their options instead. (No obligation—just FYI.)

Tender Offer vs. IPO vs. Secondary Sale

Tender offers are often the first liquidity event startup employees see, and they typically come in conjunction with a fresh round of funding.

Bottom Line

Tender offers can be a welcome opportunity for startup employees to get liquidity before a major exit. They’re not without tradeoffs—but if you’ve been granted equity and your company offers one, it’s worth understanding your options. Whether you sell, hold, or explore exercising instead, make sure your decision aligns with your goals and risk tolerance.

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