In May, AI sales automation startup Clay said it was allowing most of its employees to sell some of their shares in a $1.5 billion valuation. Coming just months after Series B, Clay’s offer of liquidity is a rarity in a market where tender offers, as these types of secondary transactions are known, are uncommon for relatively young companies.

Since then, many other new, fast-growing startups have allowed their employees to convert some of their stock into cash. Linear, a six-year-old AI-powered Atlassian rival, is done a tender offer at the same valuation as the company’s $1.25 billion Series C. Recently, the three-year-old ElevenLabs approved a $100 million secondary sale for staff, at a cost of $6.6 billion, double its former value.

And last week, Clay, which tripled its annual recurring revenue (ARR) to $100 million a year, decided it was time for its employees to cash in on the company’s rapid growth. The eight-year-old startup announced that its employees can sell stock at a valuation of $5 billionmore than 60% increase from it $3.1 billion valuation was announced in August.

These secondary sales at extremely high valuations for young, perhaps unproven companies may initially appear as a premature “cash-out” reminiscent of the 2021 bubble. The most recent example at the time was Hopin, whose founder, Johnny Boufarhat, reportedly sold $195 million worth of his company’s stock just two years before selling the company’s assets to a small fraction at its peak $7.7 billion appreciation.

But there is a critical difference between the 2021 boom and today’s market.

During ZIRP, a large portion of secondary deals provided liquidity almost exclusively to the founders of buzzy companies like Hopin. In contrast, recent transactions from Clay, Linear, and ElevenLabs have been structured as soft offers that also benefit employees.

While the investors of these times are more angry with the outsized payments of the founder in the 2021 boom, the current transfer of tender offers to the entire employee is viewed more favorably.

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

As companies stay private longer and competition for talent intensifies, allowing employees to turn some of their earnings into paper money can be a powerful tool for recruiting, morale, and retention, he said. “A little liquidity is healthy, and we’re certainly seeing that across the ecosystem.”

At the time of Clay’s first tender offer, co-founder Kareem Amin told TechCrunch that the main reason for giving employees the opportunity to cash out some of their illiquid stock is to ensure that “profits don’t just accumulate for a few people.”

Some fast-growing AI startups realize that without offering early liquidity, they risk losing their best talent to public companies or more mature startups like OpenAI and SpaceX, which often offer soft sales.

While it is difficult not to see the positive aspects of allowing employees to start reaping monetary rewards from their hard work, Ken Sawyer, co-founder and managing partner of the secondary company Saints Capital, points to the unexpected effects of the second order of employee tenders. “It’s very positive for the employees, of course,” he said. “But it allows companies to stay private longer, which reduces liquidity for venture investors, which is a challenge for LPs.”

In other words, relying on tenders as a long-term substitute for IPOs can create a vicious cycle for the venture ecosystem. If limited partners cannot see cash returns, they will be more reluctant to support VC firms that invest in startups.