Tender offers are helping fill the gap left by venture capital’s IPO lull

The ultimate ambition of most venture-backed startups is to eventually conduct an IPO. Recently, however, this dream has grown more difficult to achieve. Ever since 2022, when the pandemic bull market came to an end and corporate valuations underwent a widespread reset, the climate for public offerings has dried up considerably. 

IPOs are traditionally one of the primary ways that investors and employees are able to cash in on their company’s success and sell some of their equity for a profit. As public listings have become fewer and farther between, a growing number of companies are turning to tender offers as a way to generate the liquidity their shareholders crave. 

As was the case in so many corners of private markets, activity in tender offers climbed steeply during 2021, then fell off in mid-2022. In the three years since that dropoff, however, the number of tenders administered by Carta each quarter has been following an overall upward trend. 

This increase is a clear response to the recent slowdown in public offerings, according to Abi Riddle, an associate at Wilson Sonsini who works on tender offers and other fundraising events with a broad range of venture-backed companies. 

“The slow IPO environment has directly fueled tender activity,” Riddle says. “Later-stage companies, in particular, are finding that traditional exit opportunities remain limited. To bridge that gap, they are turning to tender offers as a way to reward employees, provide liquidity, and manage stockholder expectations while they continue to build toward a public offering or other liquidity event.” 

What tenders look like today

In some tender offers, a company will re-acquire some of its own shares from other equityholders. Also called a stock buyback, this type of transaction allows the company to cash out some of its shareholders while also consolidating its cap table. In other tenders, the buyer is a third-party investor or multiple third-party investors, who may or may not be existing investors on the company’s cap table.  

Some of the companies pursuing tenders this year are doing so for the first time. Others have begun to make tenders a more regular part of life as a private startup. 

“Many companies that conducted tender offers during the 2020-2021 cycle are now revisiting the idea, and we’re seeing renewed momentum across later-stage companies in particular,” Riddle says.

Who conducts tender offers? 

So far this year, about 61% of tenders administered on Carta involved companies at Series C or later, while the other 39% involved companies between the seed stage and Series B. 

Compared to last year, this split between early-stage and later-stage tender activity is roughly the same. Compared to four years ago, early-stage tender offers have become more common. 

The size of tender offers

Tender offers conducted by later-stage companies tend to be larger than tenders run by younger startups. This makes intuitive sense. In general, later-stage companies tend to have higher valuations and more shareholders. Relative to smaller companies, they typically need more capital to meet their strategic needs. 

So far in 2025, the gap between earlier and later stages is widening. The median tender offer at Series C+ during the first half of the year saw $27.6 million in shares change hands, compared to a median of $5 million at Series B and earlier. In other words, the typical tender offer at Series C+ was about 5.5x larger. 

In 2022 and 2023, there was a notable decline in the size of tenders at Series C+, with the median falling by more than 50%. Since then, though, tender sizes at these later stages have rebounded. Overall, the median offering size at Series C+ declined by 31% between 2021 and the first half of 2025. 

From seed through Series B, median tender size has bounced up and down from one year to the next, but the overall recent trend is downward. Compared to 2021, median tender size in H1 2025 was down 59%. 

Participation rate and subscription rate

Earlier-stage tenders and later-stage tenders also continue to diverge in terms of participation rate—the percentage of eligible sellers who choose to sell some portion of their shares in a listing.  

Back in 2021, the median participation rate was much higher at earlier stages and lower at later stages. Since then, the math has flipped. In H1 2025, median participation rate was 46.4% at seed through Series B and 65.6% at Series C+, a gap of nearly 20 percentage points. 

Late-stage tender offers have also seen an increase in subscription rate, which measures the amount of demand from potential buyers that sellers were willing to meet. In H1 2025, the median tender offer at Series C or later was fully subscribed, meaning that sellers met all available demand. On tenders run by earlier-stage companies, subscription rates have remained high for the past five years.

For early-stage tenders, high participation rates in 2021 were likely influenced by that year’s bull market. With venture-backed valuations soaring to record highs, some early-stage equityholders chose to capitalize on their shares while they had the opportunity. 

At the same time, the IPO market was booming, which may help explain the lower participation rate among late-stage startups in 2021. Believing that a full exit opportunity may be right around the corner, later-stage equityholders might have been a bit less inclined to sell their shares in a tender.

Today, the participation rate for later-stage tenders is likely increasing for the same reasons that the frequency of tenders is increasing. As traditional opportunities for liquidity grow harder to find and employees find themselves holding onto shares that have long since vested, some of those employees at late-stage companies are increasingly eager to liquidate some of their equity in whatever way they can. 

“They recognize that their companies may not IPO,” says Lindsey Mignano, founding partner at SSM Legal, a law firm that represents emerging tech startups. “And the need for liquidity in that case is real.”

An increase in seller interest

If we combine transactions across all stages of startups, the medians for participation rate and subscription rate in tender offers have largely held steady in the past few quarters. 

On a longer timeline, though, both the median participation rate and the median subscription rate are clearly trending up, indicating an increase in transactional interest among sellers. 

“Liquidity events through tenders are becoming more normalized,” Riddle says, “which makes employees more comfortable engaging when the opportunity arises.” 

Back in Q1 2021, the median subscription rate across tenders administered on Carta was 73.8%—that is, eligible sellers were willing to sell 73.8% of the shares that buyers offered to acquire. In H1 2025, that figure was 99.9%. Over that same period, the median participation rate increased from 36.6% to 56%. 

When companies conduct a tender offer, they often limit the percentage of shares that eligible sellers are permitted to sell. These caps can exist for a number of reasons, including to ensure that supply and demand in the tender are roughly aligned, to aid in ongoing employee retention, and to maintain cap table cleanliness. 

In the median tender structured as a stock buyback, the company caps the portion of shares that eligible employees can sell at 25%. Ex-employees, meanwhile, aren’t eligible to sell any shares in the median stock buyback. Tenders structured as secondary sales with third-party buyers tend to look a little different. In these transactions, the median cap for both employees and ex-employees sits at 20%. 

Discounts and pricing trends 

For most of the past five years, the median tender offer administered on Carta within a year of the company’s last priced round has had no discount: That is, the valuation implied by the tender is equal to the valuation from the company’s previous round of venture funding. 

“When a tender offer is launched directly after a primary financing round, we’re generally less likely to see a discount,” Riddle says.

This timeline of conducting a tender relatively quickly after a new priced funding round is a common practice among VC-backed companies. This can be to help meet excess demand among investors who were unable to participate in the priced round, or to generate some liquidity for founders to help fund their lifestyles as they embark on a new phase of growth. 

So far this year, however, some companies are beginning to accept larger discounts in tender offers. Both the median and 25th percentile for discounts on tenders remained at 0% in H1, meaning that marked-up prices are still relatively rare. The 75th percentile for discount rate, though, has climbed to 15%, equaling a recent high from 2023.

As a rule of thumb, a higher discount rate is a sign of a more investor-friendly market. It can also be a good sign for overall activity. When companies are more willing to take a slight haircut from a previous VC-backed valuation, more deals will likely take place.