Stripe, a digital payment company, announced on Wednesday March 15 that it had successfully raised $6.5 billion. In order to carry out one of the most important fundraisers in the United States, in an economic context which is moreover gloomy, the start-up had, all the same, to reduce its valuation, going from 95 billion dollars to 50 billion dollars.
Stripe, the indicator of the financial health of Silicon Valley
Founded in 2009 in Palo Alto, California, Stripe is the darling of Silicon Valley. The start-up offers simple and quick integration of online payment solutions. She is also recognized for her extensive customer support, a strong argument for large companies calling on her. The start-up counts large companies among its clients, particularly in the technology field, Amazon, Google and even more recently Open AI. She takes care of payments and subscriptions for the start-up that created the famous GPT and Dall-E models.
Since 2013, the company has supported the strong growth of the e-commerce market which peaked during the pandemic. The period exploded its valuation from $35 billion in 2019 to $95 billion in March 2021. It thus stalled America’s Biggest Unicorn Status.
Stripe’s near-dominant position in the online payments industry, as well as its ability to keep up with trends through its large number of customers, make it an indicator of the financial health of the markets according to investors and analysts. The high volume of transactions it processes every day gives it unprecedented visibility on the economic situation of Silicon Valley.
Exactly. Today, the economic indicators are alarming and the economic context is dull. Both large and small companies are making massive layoffs to resist the downward trend in the markets. Meta has cut over 11,000 posts and will continue in 2023, Amazon over 18,000 And Twitter has cut more than half of its workforce. Stripe is not spared, the start-up separated from 14% of its employees in November 2022.
The business needs to get cash. When it was created, to attract the best talent, the company offered shares and stock options as a hiring bonus. However, these shares expire this year and Stripe must buy them back in order to keep them.
This operation represents several billion dollars, forcing the start-up to raise the funds it needs. A round table therefore took place this week in the presence, according to the FinancialTimes, with investors already present in the company’s capital, in particular billionaires Peter Thiel, Joshua Kushner and Andreessen Horowitz, as well as two new Singaporean investors. Stripe managed to raise $6.5 billion, compared to an expected $2.5 billion in January. In order to succeed in obtaining such a sum in this very particular context, the company had to divide its valuation by two.
John Collison, co-founder and president of Stripe, has wish present the operation as an aid for its employees, ” Over the past twelve years, current and former employees have helped build fundamental economic infrastructure for millions of businesses around the world, and this transaction gives them the opportunity to access the value they have contributed to create “.
Stripe’s strategy could be the start of a trend in the financial market. Other start-ups seeking funds in a complicated economy would be tempted to imitate the darling of Silicon Valley. John Collison for his part shows his optimism about the situation and the future, ” The internet age economy is still young, and the opportunities of the next 12 years will dwarf those of today. There is so much to discover and create. For us, it’s now about getting back to work “.