What Is a Tender Offer? How Startup Tender Offers Work

A tender offer is a public or broad offer to buy shares from a company's existing shareholders at a set price for a limited time. In the startup world, tender offers have become the main way that employees and early investors in large private companies turn some of their shares into cash without waiting for an IPO. Stripe, OpenAI, ByteDance, Databricks, Ripple and many other companies have run them, often setting headline valuations in the process. This guide explains how tender offers work, who can participate, how prices are set, how they differ from other secondary sales, and what to consider before selling.

Tender offers in plain terms

In a private company tender offer, a buyer, which can be the company itself, its investors or new outside investors, offers to purchase shares from eligible shareholders at a fixed price per share. Shareholders decide whether to sell, and how many shares, within an offer window that usually lasts at least 20 business days. If more shares are offered than the buyer wants, sales are typically scaled back proportionally. The company organises the process, sets the rules and usually hires an administrator or platform to run it.

The term comes from public markets, where an acquirer may "tender" for shares of a listed company. US securities rules on tender offers apply to private companies too when an offer is made broadly to many shareholders, which is why private tender offers come with formal disclosure documents and minimum offer periods.

Why companies run tender offers

• Employee liquidity: companies are staying private longer, often ten years or more. Employees with valuable stock options or shares may need cash for homes, education or diversification. Tender offers let them sell some shares while staying with the company, which helps retention and recruiting.
• Early investor liquidity: angel investors and early venture funds may want to return capital to their own investors.
• Controlling the cap table: a company-run process avoids a chaotic market of individual secondary trades and lets the company control who becomes a shareholder.
• Bringing in new investors: large investors who want exposure to a hot company can buy in through a tender without the company issuing new shares.
• Setting a valuation: the tender price often becomes a widely reported valuation, sometimes higher than the last primary round.

Real examples

• Stripe has repeatedly run tender offers for employees, with its 2026 tender valuing the company at about US$159 billion, without raising new primary capital.
• OpenAI has held several employee share sales to investors, at valuations that rose from tens of billions to hundreds of billions of dollars.
• ByteDance regularly buys back shares from employees at prices it sets, valuing the company at more than US$330 billion in its September 2025 buyback.
• Databricks, Notion, Gusto and Ripple have all used tender offers to provide liquidity; Notion's and Gusto's valuations in our database come from employee tenders.

How the price is set

Tender prices are usually negotiated between the company and the lead buyer, often anchored to the company's latest funding round or to recent growth. In hot markets, demand from investors can push tender prices above the last round. In weaker markets, tenders can be priced below the last round, effectively signalling a lower valuation. Because buyers typically receive common shares, which lack the protections of preferred stock, they may pay less per share than in a preferred round. Companies must also consider the effect on their 409A valuation, the independent appraisal of common stock used to price employee options; a tender at a high price can push the 409A up, making new options more expensive for future employees. Our guide to 409A valuations explains this link.

Who can sell

Companies set eligibility rules. Common rules include:

• Current and sometimes former employees who have held vested shares or options for a minimum period.
• Limits on the percentage of holdings each person can sell, often 10% to 25%, so employees keep a stake.
• Exclusion of some executives or limits on their sales to avoid signalling a lack of confidence.
• Participation by early investors on the same or separate terms.

Employees holding options typically need to exercise them before selling, often in a "cashless" process where the exercise price and taxes are deducted from the sale proceeds.

Tender offer versus other ways to sell private shares

Our guides to selling startup shares before an IPO and private equity secondaries cover the other routes in detail.

Taxes

Tax treatment depends on the country, the type of equity and how long it has been held, so sellers should get professional advice. In the United States, selling shares acquired through exercised incentive stock options can produce long-term capital gains if holding periods are met, while selling immediately after exercise typically creates ordinary income. Non-qualified stock options are taxed as ordinary income on exercise. Some sellers may qualify for exclusions on qualified small business stock, though large companies often no longer qualify. In other countries, employee equity is taxed under different rules, and tender proceeds may be subject to withholding through payroll.

Should you sell in a tender offer?

Deciding whether to sell is personal, but common considerations include:

• Concentration risk: if most of your wealth is in one company's stock, selling some reduces risk.
• Personal needs: a home purchase, debt or other goals may make cash today more valuable than potential gains later.
• Price versus outlook: compare the tender price with your view of the company's prospects and the likely timing of an IPO.
• Taxes: understand the tax bill before you sell and set aside money to pay it.
• Future opportunities: some companies run tenders regularly, so you may get other chances.

What tender offers tell outsiders

For researchers and investors, tender offers provide valuable signals. A tender at a higher price than the last round suggests strong demand; a tender priced lower may hint at a valuation reset. The identity of the lead buyer, such as a sovereign fund or major growth investor, indicates who wants exposure. However, tender prices for common shares aren't directly comparable with preferred share prices in funding rounds. On CapFinch profiles, we label valuations from tender offers so readers can tell them apart from primary rounds. Our guide to researching a private company explains how to interpret these signals.

A simple example

Suppose a company with 1 billion shares outstanding announces a tender at US$50 per share, implying a US$50 billion valuation, with a lead buyer willing to purchase up to US$1 billion of stock (20 million shares). An employee holds 40,000 vested options with a US$5 exercise price and may sell up to 20%, or 8,000 shares. The gross proceeds would be US$400,000, minus the US$40,000 exercise cost, leaving US$360,000 before taxes. If total demand from sellers exceeds 20 million shares, each seller's allocation would be scaled back.

Tender offers and company valuation announcements

Because tender offers don't raise money for the company, announcements often focus on the valuation rather than the amount. Headlines such as "Stripe valued at US$159 billion in tender offer" refer to the price per share multiplied by the fully diluted share count. Researchers should check whether reported figures are pre-money or post-money, whether they include all share classes, and whether the tender was combined with a primary raise. When companies run tenders below previous round prices, they sometimes describe the new figure as reflecting market conditions, effectively acknowledging a valuation reset without a formal down round.

Tender offers at public companies

Public companies also use tender offers, usually to buy back their own shares at a premium or when an acquirer wants to buy control of a listed company directly from shareholders. Those offers are tightly regulated, with disclosure requirements, minimum periods and equal treatment of all shareholders.