Secondary Markets & Tender Offers

Selling Before the IPO

Waiting for an IPO can mean waiting a decade. Two structured mechanisms exist that let you convert some equity to cash earlier — each with significant constraints.

1. Tender Offers (Company-Sponsored)

A tender offer is the official, company-approved path to early liquidity. It typically occurs when the company raises a large funding round and allows existing employees to sell a portion of their vested shares directly to the incoming investors.

• Pros: Clean legal process, priced at the latest 409A or preferred valuation, no ROFR complications, company-approved.
• Cons: Rare — most companies run one every 2–3 years at best, if at all. The company controls the timing, the price, and the percentage you can sell (often capped at 10–20% of your vested position). You have no leverage.

2. Secondary Markets (Investor-Driven)

Platforms like Forge Global and EquityZen operate as marketplaces connecting employees who want to sell with outside investors who want to buy pre-IPO shares. These are sometimes called "secondary sales."

• How it works: You list your shares (or an investor finds you), agree on a price, and execute a transfer agreement.
• The ROFR Problem: Almost every startup shareholder agreement includes a Right of First Refusal (ROFR). This clause gives the company — and sometimes existing investors — the legal right to match any outside offer and buy your shares themselves, or to block the sale entirely. In practice, most companies exercise ROFR aggressively to prevent unknown parties from becoming shareholders.
• The Career Risk: Attempting a secondary sale without explicit CEO or board approval can be treated as a breach of your shareholder agreement. Engineers have been fired or had their remaining equity clawed back for attempting unauthorized secondary sales. Always get written permission before engaging a secondary platform.

The Practical Playbook:

If you want secondary liquidity, the correct sequence is: (1) ask your CFO or General Counsel whether the company permits secondary sales, (2) get approval in writing, (3) then engage a platform. Never reverse this order.