Stripe has raised more than $6.5bn at almost half the valuation it did two years ago, sealing one of the biggest private stock sales in US history and suggesting tech start-ups may have to accept big concessions if they want fresh funds. .
The payment processing company received fresh cash from existing investors in the company, including Peter Thiel’s Founders Fund, Josh Kushner’s Thrive Capital and Andreessen Horowitz, and new backers including two Singaporean investors, state fund Temasek and sovereign wealth fund GIC.
In a difficult funding environment, it provides the San Francisco- and Dublin-based group with enough new capital to meet billions of dollars in tax liabilities associated with employee stock units, but also leaves it with a new valuation of $50bn – well below that. It will peak at $95bn in 2021.
Stripe was Silicon Valley’s hottest start-up as it rode the bubbly private market to garner investment from top venture funds. After soaring high in boom times, it is now considered the bellwether of the industry, with its valuation drop likely to set a marker for other start-ups.
“Stripe’s strategy is naturally aligned to secular trends that will only compound for decades to come: the growth of the Internet economy and the trajectory of the world’s most innovative and forward-looking companies,” said Kushner, founder and chief executive of Thrive Capital.
But many of Stripe’s leading customers — including electronic vehicle company Rivian; Buy Now, Pay Later Company Guarantee; and software company GitLab — have endured during the tech recession.
Private companies have maintained relatively high valuations, even as public tech stocks have fallen over the past year. But Stripe’s nearly halving of valuation brings it closer to public rivals.
Shares of Stripe’s closest public rival, Dutch payments company Adian, are down 55 percent from their 2021 peak, while PayPal is trading at less than a quarter of its 2021 level.
Stripe has scoured the net in search of cash over the past seven weeks. Along with existing investors, he pitched the deal to wealthy clients at Goldman Sachs, which acted as placement agent on the deal.
The company also lowered its valuation target as it scrambles to get the deal on line. Stripe had an intrinsic valuation of around $60bn earlier this year. It is seeking to raise cash at an illustrated valuation of $55bn last month, according to a presentation shared with potential investors.
Along with the fundraising, Stripe will trigger the vesting of billions worth of stock units that would otherwise begin to expire in early 2024. It would allow employees to sell stock to cancel tax liabilities associated with vesting. Workers can sell shares back to the company as part of a separate tender offer.
The deal comes against the backdrop of a deeply depressed funding environment and the collapse of Silicon Valley Bank, which serves as a banking partner for numerous start-ups and their venture backers, over the past week. Stripe says it has no contact with SVB.
In its pitch to investors, Stripe said it would be the beneficiary of an expected boom in artificial intelligence companies emerging from Silicon Valley. On Wednesday, it announced that it is partnering with OpenAI, maker of chatbot ChatGPT, to integrate AI into its payment process.
However, some investors passed on the opportunity to invest even at a $50bn valuation. Three investors who were sent Stripe’s presentation said they were wary of the use of adjusted metrics and what they said were overly optimistic growth projections.
