Sell, Mortimer! Sell! Why Early Founder and Employee Liquidity Creates Better Alignment
There’s been a pretty common belief in the venture and startup world that is changing:
If an employee wants to sell shares, they’re probably thinking about leaving.
If a founder takes some money off the table, they’re losing faith or they’re going to take their foot off the gas now that they’ve got some money.
I think VCs and founders are getting increasingly convinced this framing is off.
In a recent webinar with Amit Majumder, Head of Equity at Qapita (a Carta competitor and global equity management platform that helps startups and scaleups manage cap tables, employee equity, and investor reporting). We talked about how selling some equity can actually be a retention tool, not a warning signal.
The core misconception is simple: people assume early liquidity means lower commitment.
But I think the opposite is often true, and you can see the tide shifting. Recently, Clay announced a $55 million tender offer of employee shares at a $5 billion valuation, and here’s what they cited as the reason:
“This tender is designed to give our team the flexibility to use the value they create every day. Whether it’s buying a home, taking care of family, funding a passion project, or simply getting more breathing room, we want people to have options when life calls for them.”
For more insight into how Clay thinks about equity compensation, check out this part of an interview that Co-Founder Varun Anand did with First Round’s Brett Berson.
Varun said:
“…Treating people well and treating people in the right way and being generous with your best people, pays long term dividends, not only for doing the right thing, but also for the company and for both people involved.
And it feels not standard for how most companies handle compensation.”
When someone is in a suboptimal personal financial situation — where 90–99% of their net worth is tied to a single, illiquid company — it creates pressure. And pressure leads to bad decisions.
Not because people are unethical. Not because they don’t believe. Their entire financial life is riding on one outcome. How do you think that impacts conversations with their family and their day to day stress levels?
Giving employees and founders a chance to diversify a little while continuing to earn more equity in the aggregate can create real peace of mind. That peace of mind can meaningfully lengthen how long someone is willing to stay and keep taking risk with you.
Recently, Clay announced a tender offer, which I think is a great example of this more modern approach. It’s a signal that liquidity doesn’t have to be a binary “all or nothing” event at the very end of a company’s life.
Another data point from Qapita that stuck with me:
They’re seeing that only the first ~2.5 years of vesting is meaningfully retention-driving for most employees.
After that point, many people are already overexposed. Additional vesting alone doesn’t feel motivating unless it’s paired with refresh grants, education, and sometimes liquidity.
Equity seems to work better when it’s treated as a living system:
Ongoing refreshes.
Clear communication about dilution and value.
Education around taxes and risk.
And, in some cases, thoughtful tender offers.
This creates a counterintuitive takeaway:
Letting people take a little money off the table can make it easier for them to stay all-in.
Huge thanks to Qapita for partnering with nextNYC on this webinar series and pushing this conversation forward. If you’d like to learn more about what they do, you can reach out to their US partnerships manager Paul here.
Check out our next webinar on Fixing Broken Cap Tables on Tuesday, Febuary 17th.