Secondary products range from wind starters to staff storage equipment

In May, AI trading startup Clay said he was allowing many of his employees to sell some of their shares in the company. The cost of $ 1.5 billion. Coming a few months after Series B, Clay’s financial offering was rare in a market where philanthropic offerings, as second-tier ventures are known, are not uncommon for young companies.

Since then, several other new, fast-growing startups have allowed their employees to turn some of their products into cash. Linear, the six-year-old AI-powered Atlassian competitor, has ended charitable giving for the same amount and $ 1.25 billion Series C. Recently, the three-year-old ElevenLabs approved a second sale of $ 100 million to employees, at a price of $6.6 billion, twice its old value.

And last week, Clay, who has tripled his annual recurring revenue (ARR) to $100 million in one year, decided it was time for his employees to invest in the company’s growth. The eight-year-old founder announced that his employees could sell goods at a price of $5 billionan increase of more than 60% from its own $3.1 billion price announced in August.

This second sale at a very high price of a young company, perhaps not yet proven, can be seen as a long-term “cash out” reminiscent of the bubble of 2021. The worst example of that time was Hopin, whose founder, Johnny Boufarhat, is said to have sold his company’s stock for $195 million just two years before the company’s stock was put up for sale. a small part of its peak $7.7 billion to calculate.

But there is a big difference between the 2021 boom and the current market.

During the ZIRP period, a large part of the secondary actions gave money almost exclusively to the founders of well-known companies such as Hopin. In contrast, recent developments from Clay, Linear, and ElevenLabs have been designed as offerings that also benefit employees.

While today’s investors are more concerned about the wages that started the 2021 boom, the current changes in the labor market are more favorable.

“We’ve done a lot of tenders, and I haven’t seen any issues,” Nick Bunick, a partner at second-tier VC firm NewView Capital, told TechCrunch.

As companies remain private for longer and competition for talent intensifies, allowing employees to turn some of their earnings into cash can be a powerful tool for recruitment, morale, and retention, he said. “A little money is healthy, and we’ve seen it all over the world.”

During Clay’s first tender offer, co-founder Kareem Amin he told TechCrunch that the main reason for giving workers access to some of the income they are not allowed to use was to ensure that “benefits are not concentrated in the minority.”

Some fast-growing AI startups have realized that without seed funding, they risk losing their best talent to public companies or mature startups like OpenAI and SpaceX, which offer regular sales pitches.

While it’s hard not to see the benefits of allowing employees to be rewarded for their hard work, Ken Sawyer, co-founder and managing partner at second-tier firm Saints Capital, pointed out the potential side effects of employee tenders. “It’s very good for the workers, yes,” he said. “But it helps companies stay private for a long time, reducing costs for investors, which is difficult for LPs.”

In other words, relying on tenders as a long-term substitute for IPOs can improve environmental performance. If limited partners don’t see a return on investment, they may not want to back the VC-backed companies that invested in the startup.