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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

Ben Geman, author of Generate
Jan 29, 2021 - Energy & Environment

Electric vehicle sales far surpass pandemic expectations

Data: EIA; Note: 2020 figures are preliminary; Chart: Axios Visuals

New International Energy Agency preliminary data shows that worldwide sales grew by an estimated 40% last year, exceeding the agency's expectations.

Why it matters: The increase occurred despite a drop on overall global vehicle sales.

Virginia governor orders probe into pepper-spraying of Army officer

Virginia Gov. Ralph Northam at the Governor's Mansion in Richmond, Va. in 2019. Photo: Katherine Frey/The Washington Post via Getty Images

Virginia Gov. Ralph Northam (D) announced Sunday he's ordered the state police to conduct an independent investigation into a traffic stop during which two officers pepper-sprayed and drew guns on an Army lieutenant.

Driving the news: Caron Nazario, who is Black and Latino, is suing the police officers over the incident, which attracted widespread criticism after video footage emerged. Northam said in a statement he found the incident "disturbing" and that it angered him.

Biden pollster urges blunt tax talk

Illustration: Aïda Amer/Axios

The top pollster for Joe Biden's presidential campaign is advising the White House to do something that often makes Democrats nervous: Talk loudly and proudly about raising taxes on the rich.

Why it matters: John Anzalone tells Axios his extensive polling and research has found that few issues receive broader support than raising taxes on corporations and people earning more than $400,000 a year.