Tender Offers and Secondary Sales: A Guide for Startups

A tender offer is a company-run, time-boxed invitation for shareholders to sell some of their stock at one fixed price, either back to the company (a buyback) or to an investor who wants more shares. A secondary sale is any sale of existing shares rather than new ones. In our view, a well-run tender offer is the main way a private startup can give employees liquidity years before an IPO or acquisition.

Definition: A tender offer is a broad, open offer to buy a company's securities from its holders at a stated price for a limited period. When the company or its investors run one for a private startup, the SEC's Regulation 14E applies; it sets the minimum time the offer stays open and prohibits misleading statements.

Equity is a promise. A tender is the first time some of that promise turns into rent money.

In 2026 a tender program has become a recruiting tool as much as a finance decision. This guide walks through one practical way to approach it: when you're ready, which structure to pick, how the process runs, how to price it, what it does to taxes and to your 409A, and how to decide who can sell. For the wider picture of IPOs, acquisitions and exits, see our guide to liquidity events.

Our take: plan liquidity early, run it late, cap what stayers sell

Our view for founders fits in one line: promise a credible path to liquidity from the first hire, run the first tender only when the company can absorb it, and cap what the people you still need can sell.

Each part has a reason behind it.

Plan early, because talent increasingly prices it in. Strong candidates increasingly ask when, not whether, they'll be able to sell some stock. Jason Lemkin of SaaStr puts the bar at high confidence that a company will be running tenders within about 24 months. You probably don't need a program on day one, but a believable story helps, and your seed-stage documents (option plan, ROFR, investor rights) decide how hard that story is to deliver later.
Run it late, because a premature tender can cost you. A tender lifts the 409A price new hires pay, spends cash or investor demand you might need for the next round, and can drain motivation if key people sell too much. Rory O'Driscoll of Scale Venture Partners frames the employee's best trade clearly: join a company that isn't yet running tenders, take a healthy grant priced for that risk, and be 50 to 60 percent vested when it starts tenders a year or two later. We think that's also a sound design for founders: early employees are paid for the wait through grant size, not through early cash.
Cap what stayers sell, because they tend to capture the value. Looking back at old positions, selling early in a secondary often looks like a sensible call, but the few holdings that kept compounding account for most of the value. That's the power law applied to a single cap table, and it's why we lean toward limiting how much any current employee or founder sells rather than encouraging a full exit.

The tender readiness test

We'd be cautious about launching a program until most of these are true:

A strong priced round in the last 6 to 12 months, so the price has a recent anchor.
Investor demand for more shares than the primary round offers, or spare cash on the balance sheet for a buyback.
A clean cap table and a grant history that will survive legal review.
A meaningful group of employees with long tenure and vested equity.
A 409A provider who has been told about the plan and has modeled its effect.

Carta's H1 2026 data shows where most companies land on that test: nearly 70 percent of tenders on its platform were at Series C or later.

Tender offer, direct secondary or buyback: choose your structure

Three structures get lumped together as secondaries. One way to choose is by who buys, who controls the process, and how much legal work you can carry.

Structure	Who buys and who sells	Typical trigger	Key feature
Company buyback (issuer tender offer)	The company buys, often with cash from a new round, from employees, ex-employees and early investors	Company wants to reward staff or tidy the cap table	Company spends its own cash; the 10-business-day SEC relief can apply
Third-party tender offer	A new or existing investor buys from the same broad group, at one price	An investor wants more ownership than the primary round offers	No cash from the company, no new dilution
Direct secondary	One buyer and one seller (often a founder or early angel)	A negotiated one-off sale	Runs through your transfer restrictions and right of first refusal

Carta's guide to tender offers, published in June 2026, draws the same line. A share buyback uses the company's cash, while a third-party tender lets outside investors buy existing shares, often when a funding round is oversubscribed and investors want more stock than the company is willing to issue.

A direct secondary is the one most founders meet first. A seed angel wants out, or a departing cofounder wants to sell to a fund. Those sales are governed by your bylaws, stock plan and investor agreements, which typically give the company, and often the major investors, a right of first refusal over any transfer.

We tend to favor handling one-off requests case by case and moving to a structured tender once requests pile up. A tender lets the board approve one program, waive or exercise the ROFR once, and apply the same terms to everyone eligible.

How common are tenders? Carta counted 71 tender offers worth about $3 billion on its platform in H1 2026, in a report published in August 2026, up 34 percent by count from a year earlier. The median offer size was $28.5 million at late stage versus $8.5 million from seed to Series B. On those figures, tenders look routine at growth stage and remain the exception at seed and Series A.

How a tender offer works, step by step

The legal plumbing is the same whether the buyer is the company or an investor, with one important timing difference.

Decide the goal and the buyer. Reward long-tenured staff, clean up a crowded cap table, or give an investor more ownership. The goal sets the buyer: company cash for a buyback, investor cash for a third-party tender.
Check your documents. Read the stock plan, bylaws, investors' rights and ROFR and co-sale agreements for transfer restrictions, investor consent rights and any restrictions on repurchases. For a company buyback, Delaware law requires payment out of surplus, as Carlton Fields' April 2026 guide sets out, so the board has to confirm it has enough.
Get board approval. The board approves the size, price, eligible sellers and caps, waives or assigns the ROFR for the program, and minutes why the price is what it is.
Bring in counsel, a tax adviser and your valuation firm early. Your 409A provider needs to know about the tender before it closes, because it will affect the next valuation.
Prepare the offer documents. An offer to purchase describes the terms, the company's recent financial picture, the risks and the tax consequences. Regulation 14E's anti-fraud rule applies and prohibits misstating or omitting material facts, so the document should match what investors saw in the last round.
Launch and keep it open. Under SEC Rule 14e-1, a tender offer must stay open at least 20 business days, and at least 10 business days after any change in the price or the percentage sought. Since an SEC exemptive order of April 16, 2026, a private company's own all-cash, fixed-price offer for its equity can instead run for 10 business days, provided a price or size change is announced by 9:00 a.m. Eastern on the fifth business day before expiration, and other material changes by the second business day before expiration. The relief covers offers by the issuer or its wholly owned subsidiary, not third-party tenders.
Allocate and close. If holders tender more shares than the buyer will take, cut everyone back pro rata. Pay promptly after expiry, which the rule also requires.

A note on scope: SEC Rule 13e-4, the detailed issuer tender offer rule with its Schedule TO filing, applies to companies with SEC-reporting obligations. Regulation 14E applies to all tender offers, including those by non-reporting issuers, which is why private tenders still follow the minimum-period and anti-fraud rules. Rule 701 and state securities laws also govern how the underlying option grants were issued, so a messy grant history becomes a tender problem. It's one more reason we read the cap table first. Clean records, kept in a proper cap table management system, make every step faster.

Tender offer pricing: preferred price, 409A and the discount

A common approach is to anchor the price to your latest round and decide the discount with the 409A in mind. Three numbers matter:

The preferred price of the latest round, which carries liquidation preferences and other rights that common stock lacks.
The 409A value of common stock, set by an independent appraiser and usually well below the preferred price.
The tender price the buyer pays, which normally sits between the two or at the preferred price.

Market practice, as Gunderson Dettmer's guide to tender offer terms describes it, is to reference the most recent financing: recent preferred at that price, and common or older preferred often at a discount of typically 5 to 20 percent, partly to limit the effect on the 409A. Carta's H1 2026 data is more generous to sellers. For tenders held at least a year after a primary round, the median discount to that round has been zero for five straight half-year periods, although the 75th percentile discount rose to 10 percent.

The spread between the 409A value and the tender price drives both the tax treatment and the 409A impact, covered next. If you need a refresher on how the common price is set in the first place, see our 409A valuation guide for founders.

Secondary sale tax basics for employees and founders

This section is general information, not tax advice. Each seller will likely want their own adviser, and the company should give sellers a plain-language tax summary in the offer documents, which Carta's guide treats as standard.

Capital gain or compensation. A plain sale of stock held more than a year is normally a long-term capital gain. The risk in a startup tender is that the IRS treats the part of the price above fair market value as pay for services, taxed as ordinary income with payroll withholding.

The factors that push toward compensation treatment, as Gunderson Dettmer's guide lists them, are a buyer who is the company or an insider, sellers who are all employees, common stock, and a purchase that is large relative to the cap table. A buyback, where the company pays its own staff more than the 409A value, carries the most risk. A tender led by an arm's-length third-party investor that buys preferred and common from a mix of holders carries less.

Incentive stock options. Under Section 422 of the Internal Revenue Code, ISO stock keeps its favorable treatment only if it is held at least 2 years from the grant date and 1 year after exercise. Exercising and selling in the same tender is a disqualifying disposition, so the gain is taxed as ordinary income. The IRS's Topic 427 also flags that exercising an ISO can trigger alternative minimum tax in the year of exercise, which matters for employees who exercise early to start the holding clock before a future tender.

Non-qualified options and RSUs. The spread at exercise of a non-qualified option is ordinary income. Employees who already hold shares from an earlier exercise, and have held them for more than a year, are the most likely to get capital gain treatment.

Founders. Founder common bought at formation and held for years is the classic capital gain case. That's exactly why founder sales at a premium to the 409A value get the most scrutiny. Run founder sales as a separate, disclosed transaction with its own tax analysis.

Qualified small business stock (QSBS) under Section 1202 is a separate question with its own holding periods and caps; ask your adviser before any founder or early employee sells stock that might qualify.

Worked example: an illustrative $18 million tender at Series B

Take a hypothetical Series B software company (the figures are illustrative). Its latest preferred price is $10.00 per share and its most recent 409A value for common is $3.00. A Series B investor wants to buy $18 million of common stock in a third-party tender. The board sets a price of $9.00, a 10 percent discount to preferred.

Shares bought: $18,000,000 / $9.00 = 2,000,000 shares.
Eligibility: current employees with at least two years of tenure may sell up to 20 percent of their vested shares; former employees up to 100 percent of vested shares; founders sell separately.
Oversubscription: eligible holders tender 2,500,000 shares, so every seller is cut back to 2,000,000 / 2,500,000 = 80 percent of what they tendered.

One employee. She holds 50,000 vested options with a $1.00 strike and tenders the maximum 10,000. After proration she sells 8,000 shares for $72,000, pays $8,000 to exercise, and has a pre-tax spread of $64,000. If those were ISOs exercised in the tender, the sale is a disqualifying disposition and the gain is ordinary income.

One founder, in a separate sale. The founder sells 200,000 shares at $9.00 for $1,800,000. The premium over the 409A value is ($9.00 minus $3.00) x 200,000 = $1,200,000. If the IRS treated that premium as compensation, it would be taxed as wages rather than as a long-term capital gain, which is why the buyer's independence and the process matter.

The 409A afterwards. Suppose the valuation firm gives the tender price some weight in the next 409A, alongside its usual method that produced $3.00:

Weight on the $9.00 tender price	Next 409A value for common
0 percent	$3.00
20 percent	$4.20
50 percent	$6.00

New hires would pay the higher strike, which makes each option less attractive. Carta's January 2023 analysis estimated that a secondary price might then account for about 50 percent of a valuation used for 409A and accounting purposes, up from about 5 percent a decade earlier. The weight rises when a secondary involves a larger share of the company, recurs on a schedule, includes many buyers and sellers, and gives all parties equal information. Carta's 2026 tender offer guide adds that some companies find the increase is not meaningful when eligibility is tightly controlled.

Design the program with your valuation firm before launch. It improves your odds of landing near the top row of that table rather than the bottom.

Deciding who can sell, and how much

In our view, this is where founders add the most. The mechanics are fairly standard. The policy is yours, and one reasonable order to set it in follows.

Eligibility. The usual groups are investors, former service providers and current service providers. Carta's H1 2026 data shows ex-employees are usually shut out: in the median tender on its platform over the past three and a half years, none were eligible to sell. A larger share of current employees is eligible in buybacks than in investor-led secondaries.

Caps. One starting point we like: a minimum tenure of about two years and a cap of around 20 percent of vested shares for current employees, with former employees and early investors allowed to sell more. Gunderson Dettmer's guide describes both limits as common. Most programs limit sales to vested equity. Caps help keep the people you need invested in the outcome.

Participation. Carta's Q2 2026 median seller participation rate was 57.9 percent and the median subscription rate was 93.1 percent. So expect a meaningful share of eligible holders to sit out, and the buyer to take most of what is offered.

Founders. Selling some founder stock is normal at growth stage and often good for the company, because a founder with no personal liquidity may take less risk. We'd keep it modest, disclose it to the board, and run it after or separate from the employee program so employees get the first allocation.

Cadence. A one-off tender helps once. A predictable annual or semiannual program is the stronger recruiting message, but recurring programs weigh more heavily in the 409A. Pick a cadence you can sustain through a downturn. Private-market appetite can vanish quickly, and cancelling a promised program damages trust.

If your equity plan, option pool and offer letters are still being designed, build in the transfer restrictions and ROFR now; our guides to the equity incentive plan and to startup compensation and equity cover the setup.

A simple pre-launch tender checklist

Write down the goal in one sentence: retention, recruiting, cap table cleanup or investor ownership.
Choose the buyer: company buyback or third-party tender.
Confirm authority: charter, bylaws, investor consents, ROFR and co-sale waivers, and Delaware surplus for a buyback.
Brief your 409A provider and auditor on the proposed price and size before the board votes.
Set eligibility, tenure minimums, per-person caps and a proration rule.
Decide founder and executive participation separately, with board disclosure.
Get a tax memo on compensation risk, ISOs and QSBS, and summarize it in plain language for sellers.
Prepare the offer to purchase and check it against your latest investor materials.
Set the timeline: 20 business days, or 10 for a qualifying all-cash, fixed-price company offer.
Plan the employee communication: who is eligible, why caps exist, and when the next window may open.

"But top people want liquidity now"

That's the strongest argument against our "run it late" line, and some investors make it well. In this view, liquidity is close to table stakes for top talent, and a company that makes people wait a decade will lose them to one that doesn't.

But Early cash has costs too. The other camp holds that liquidity arrives when a company reaches a certain stage, and that early employees are paid for the wait through the size of their grant. We sit between them. A tender run at the wrong moment hurts the company, yet a credible plan for future liquidity is now part of a competitive offer. So put the plan in the offer letter conversation, and put the program itself on the board calendar once you pass the readiness test.

Where views differ on employee liquidity

Two more debates are worth knowing about.

Secondaries as a deal sweetener. Competitive rounds increasingly include secondary purchases, sometimes very large ones for very young companies, because buyers want more shares than the company will issue. That can be healthy when it funds recruiting and the buyer is paying for real demand. It becomes a problem when it's one of several terms that are bad for the company, accepted only to win the deal. Judge the secondary as part of the whole term sheet, not in isolation.

New exit routes. Some investors now float smaller IPOs of a few hundred million dollars, sold mostly to retail investors, as a future route to liquidity for mid-stage companies. We'd treat that as an idea to watch rather than a market to plan around today. Tenders remain the tool you control.

Common tender offer mistakes

Launching before talking to the 409A firm. The next valuation can jump and new hires may get worse option pricing.
Letting key people sell too much. Uncapped sales by current leaders reduce their stake in the upside the tender was meant to reward.
Paying a big premium in a company buyback. It raises the risk that the premium is taxed as compensation.
Forgetting the ROFR and consents. A program that skips a required waiver can be challenged by an investor.
Mixed messages. A tender document that paints a different picture from your last pitch deck is an anti-fraud risk under Regulation 14E.
Promising a cadence you can't keep. If liquidity is part of the recruiting pitch, a cancelled program is a broken promise.

Liquidity decisions start much earlier than growth stage: the ROFR language, option plan and investor rights you sign at seed shape every future tender. 1752vc's Accelerate program invests $100K at a valuation cap of up to $3.5M in early-stage startups, runs remotely with rolling admissions, and its access to 850+ investors is a practical way to hear how later-stage buyers read a cap table before those documents are locked in. For how early investors think about the return on your round in the first place, see our companion guide on seed valuations and venture return math.

The bottom line

A tender is a good tool used at the right moment and an expensive one used early. Promise the path, earn the program, cap the people you still need, and talk to your 409A firm before anyone else.

Selling a little buys a team some breathing room.

Selling too much buys out the people you still need.

Key takeaways

A tender offer is a fixed-price, time-boxed offer to buy shares from many holders; a buyback uses company cash, a third-party tender uses investor cash.
Regulation 14E applies to private tenders: 20 business days, or 10 for a qualifying company all-cash, fixed-price offer under the SEC's April 16, 2026 order.
Price usually references the latest preferred round; Carta's H1 2026 data shows a median discount of zero for tenders a year or more after a round.
The gap between the tender price and the 409A value drives both compensation tax risk and the size of the next 409A increase.
In our view, it helps to plan a credible path to liquidity from the first hire and to launch a program once the company passes the readiness test.
Capping sales by current employees and founders can keep the people building the company invested in the upside.

Frequently asked questions

What is a tender offer at a private company?

A tender offer at a private company is an organized program in which the company or an investor offers to buy shares from many shareholders at one fixed price during a set window, and each eligible holder chooses whether to sell. SEC Rule 14e-1 requires it to stay open at least 20 business days, or 10 business days for a qualifying all-cash, fixed-price offer made by the company itself.

Do employees pay tax on shares sold in a tender offer?

Yes. Employees pay tax on the gain, and the type of tax depends on how they hold the stock. Shares held more than a year can qualify for long-term capital gain rates, while exercising and selling in the same tender usually creates ordinary income, and for incentive stock options a disqualifying disposition. If the price exceeds fair market value, part may be treated as compensation. Personal tax advice helps.

How much stock can employees sell in a tender offer?

The company sets the limits. A common pattern is to let current employees with about two years of tenure sell a capped share of vested stock, such as 20 percent, while former employees and early investors may sell up to all of their vested shares. If holders offer more stock than the buyer wants, everyone is cut back pro rata so the program stays fair.

Does a tender offer increase the 409A valuation?

It can. Valuation firms may give weight to the tender price when setting the next 409A value for common stock, especially when the tender is large, recurring, involves many buyers and sellers, and all parties have equal information. Some companies see little change when eligibility is tightly controlled. It usually helps to brief your valuation provider before launch so the program is designed with the 409A in mind.

When should a startup offer a tender offer to employees?

Most tenders happen at growth stage: Carta found nearly 70 percent of H1 2026 tenders on its platform were at Series C or later. A startup is usually ready when it has a strong recent round, investor demand for more shares than the primary round offers, a clean cap table, and enough employees with long tenure and vested equity. Earlier programs are possible but smaller and rarer.

Sources

Disclaimer: This guide is for general education only and is not legal, tax or investment advice. Laws, market data and program terms change, so it may not reflect the latest developments or fit your situation. Treat it as a starting point, not a source of truth, and talk to a qualified lawyer, accountant or financial adviser before you make decisions.