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Illustration: Lazaro Gamio / Axios

Pipe, a marketplace for revenue-based lending, has started to let its employees sell some of their equity each year through company-managed secondary sales on the AngelList platform.

Why it matters: Shareholder liquidity continues to be a challenge for tech startups as companies remain private longer than ever before.

“I actually think that at a growth stage, companies need to start thinking like public companies,” Pipe co-founder and CEO Harry Hurst tells Axios of the need to provide more employee liquidity opportunities.

What’s new: Since publicly debuting its services for startup secondary sales in September, AngelList is now adding features that let companies automate these on a recurring basis.

  • While AngelList can help companies fill out rounds with additional buyers, it doesn't see itself as a marketplace for startup stock and companies typically already have buyers in mind.

As large private tech companies take longer to go public, many employees find themselves unable to leave if they can't afford to exercise their vested equity (and the big tax bill that often follows).

  • At the same time, startups have been apprehensive about letting employees freely sell their stock and losing control over their cap tables.
  • Some startups also view the illiquid stock as an incentive for employees to commit to a company and view cashing out as diluting this sentiment.

Between the lines: “I just have this fundamental belief that the way the system is set up isn’t friendly for employees,” says Hurst. “It isn’t set up for team members of tech companies to win along the way.”

  • “If you expect someone to give you five, six, seven, even a decade of their life, people are going to have life events happen—having [equity] on paper doesn’t actually help you.”

Pipe is now orchestrating annual secondary sales, letting every employee sell some vested equity, no questions asked, says Hurst.

  • The company's existing investors have become regular participants on the buyer side of these transactions.
  • While Pipe itself hasn't used these sales to buy back some of its own equity, Hurst says it's entirely possible it may do that at some point.

The bottom line: “We’ve seen the evolution of capital come in and position themselves as ‘founder friendly’—I think the next phase is for founders to be more ‘team friendly.’”

Editor's note: The story has been updated to clarify that Pipe is a marketplace (not a direct lender).

Go deeper

Felix Salmon, author of Capital
Jan 14, 2021 - Economy & Business

The complex new landscape of going public

Illustration: Aïda Amer/Axios

The question is no longer whether a company should go public; it's how.

Why it matters: The much-resented traditional IPO, run by Wall Street and largely for Wall Street, now has competition. A lot of it.

Fed chair says low interest rates aren't driving stock market prices

Jerome Powell. Photo: ANDREW CABALLERO-REYNOLDS / Getty Images

Federal Reserve chairman Jerome Powell told reporters on Wednesday that rock-bottom interest rates aren't playing a role in driving stock prices higher, while noting that vulnerabilities to the financial system are "moderate."

Why it matters: The statement comes amid unshakeable stock prices and a Reddit-fueled market frenzy — prompting widespread fears of a bubble and the role monetary policy has played in that.

2 hours ago - World

Biden freezes U.S. arms deals with Saudi Arabia and UAE

Trump struck several large arms deals with Mohammed bin Salman (L) and Saudi Arabia. Photo: Kevin Dietsch-Pool/Getty Images

The Biden administration has put on hold two big arms deals with Saudi Arabia and the United Arab Emirates which were approved in the final weeks of the Trump administration, a State Department official tells Axios.

Why it matters: The sales of F-35 jets and attack drones to the UAE and a large supply of munitions to Saudi Arabia will be paused pending a review. That signals a major policy shift from the Trump era, and may herald sharp tensions with both Gulf countries.