Liquidity Without a Playbook: What Private Companies Told Us About Employee Liquidity

Employee liquidity has become a standard feature of the private company landscape. Whether it has become a standard part of the employee experience is another question.

Pave surveyed 46 private companies—among them Databricks, Anduril Industries, and Plaid—about how they approach employee liquidity. Three findings frame everything that follows:

• 63% have offered a structured liquidity event, such as a tender offer or company-led buyback
• Only 11% offer one on a recurring or scheduled basis
• Just 11% describe the event to employees as a planned, recurring benefit of working at the company

Liquidity is happening. It is rarely happening as a program. For equity and compensation leaders, that distinction is not cosmetic. An event employees can anticipate shapes how they value their equity, when they exercise, and how they plan financially. An event that arrives unannounced does none of that work.

Liquidity events follow circumstance, not a calendar

Among companies running ad-hoc events, two triggers tie for the top spot: board or CEO discretion and funding rounds, each cited by 57%. Employee demand follows at 43%, and investor demand at 35%. Cap table cleanup (13%) and hitting valuation or revenue milestones (9%) are comparatively rare.

Read together, those numbers describe a decision that sits with leadership and gets made in response to something else happening—a raise, a board conversation, or a groundswell of employee questions.

Most employees get less than two months of notice

Liquidity events move quickly, and employees feel it. More than a third of companies, 37%, give employees less than one month of advance notice before an event opens. Another 33% give one to two months. Only 7% provide three to four months, and 22% say the timeline varies.

Put differently, roughly 70% of employees have two months or less to make a decision that carries real tax consequences, may require funding an option exercise, and cannot be reversed.

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Companies reach for familiar structures and existing valuation marks

When companies do run an event, they use well-worn instruments. The tender offer under Rule 14e-1 accounts for 57% of most recent events, followed by company-facilitated direct secondaries at 26% and company-led issuer buybacks at 13%. Existing investors are the most common purchaser at 43%, well ahead of the company itself and new third-party investors, each at 13%.

Pricing is where the data gets interesting. Not one company in the survey used an auction or modified Dutch auction to set a per-share price. Most peg to a mark that already exists: 30% price at the most recent 409A valuation and 26% at the most recent preferred round price. Smaller shares apply a discount to the preferred price (13%), a premium to the 409A (9%), or negotiate independently of both (13%). Where both share classes participated, 57% paid common and preferred shareholders the same per-share price.

Caps follow the same pattern of convention over calibration. Nearly three-quarters, 74%, cap sales as a percentage of the shares or options an employee holds, with 20% to 29% the most common ceiling. Only 13% impose no cap at all.

One result stands out for its uniformity. No company in the survey enforces a cumulative lifetime cap on how much equity an employee can sell across multiple events. Sixty-eight percent said they do not, and the remaining 32% did not know. Each event is governed on its own terms, with no running total.

Eligibility is the most standardized practice, and the most open

Tenure is the primary gate, and one year is the clear norm at 60% of companies. Two years (10%), six months (5%), and three or more years (5%) are outliers, while 20% vary the requirement by employee group.

Liquidity is not structured as a leadership perk. No company gates participation on an employee's level or grade, and only 8% require meeting a performance rating threshold. Where carve-outs exist, they run in the other direction: 42% apply separate rules to founders and executives.

The most telling finding concerns people who have already left. A majority of companies, 58%, allow former employees to participate in some form, and 46% allow it regardless of when the person departed. Only 21% exclude alumni outright.

That last number complicates a common assumption. If liquidity events functioned primarily as a retention mechanism, alumni would be the first group excluded. Instead, most companies keep the door open, which suggests these events are doing something closer to cap table management and goodwill than golden handcuffs.

Methodology: Pave's Liquidity Practices Pulse Survey collected responses from 46 private companies. Base sizes vary by question, as several questions were asked only of companies that have run a liquidity event. Segment breakdowns are directional given smaller subgroup sizes.

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