Prepaid variable forward contracts are complex instruments that can be used by shareholders to get liquidity without selling. They sort of look like a sale and sort of look like zero-interest loans. They inherit attributes of both.
A forward is an agreement between a buyer and a seller to transact in the future under terms agreed upon today. Prepaid variable forwards are a subtype with nuances specific to when they're structured for startup equity.
The buyer delivers cash to the seller today, but the seller won't deliver the shares until a future date. For startup equity, that future date is usually defined as a liquidity event.
Forwards like this do come with a tax advantage for the seller - they don't have to pay taxes on the sale until the future date when the shares are delivered to the buyer. Be careful though. While it's great to defer taxes, it does mean that a seller can be caught out with a big tax bill for cash that was delivered much earlier.
Most often, no. These are complex transaction that usually complicate the ownership of the equity providing the companies with less control over the equity.