Did Stripe Miss Its Moment?
Stripe didn't go public during the tech bull run. Now expiring employee RSUs are creating a headache.
While I’ve been chronicling investor excitement around artificial intelligence startups, the other big storyline in startup world over the past few months have been the troubles at private payments company Stripe:
Stripe marked down its internal valuation to $63 billion.
The company laid off 14% of its workforce in November 2022.
In 2021, Claire Hughes Johnson stepped down as chief operating officer.1 This week, Stripe’s CFO Dhivya Suryadevara announced she was leaving.
Now, soon-to-be expiring employee restricted stock grants are putting pressure on the company to figure out a way to avoid screwing over its earliest employees. The company has indicated that it will find a solution. Either Stripe will raise money to help the employees exercise their stock grants or go public, according to The Information. Otherwise, those early employees’ shares would expire.
I had to chuckle when I looked back at CNBC’s coverage of Stripe last funding round in March 2021. CNBC ran with the headline, “Stripe raises new capital, reaching $95 billion valuation ahead of highly anticipated market debut.”
Of course, that market debut still hasn’t happened. Stripe stayed private even as tech stocks surged. In September 2021, Bloomberg reported Stripe held talks with bankers about a potential 2022 public listing. Then, by December 2021, it was too late. The markets started unwinding and public listings ground to a halt.
Now, Stripe is raising a down round. The company, founded in 2010, is reportedly in talks to raise at between a $55 and $60 billion valuation.
Public market comps for Stripe have collapsed. Block (formerly known as Square) is down 70% from its all-time high in August 2021, while Affirm has fallen 89% since its peak in November 2021. Payments company PayPal is down 72% from its high.
Tech companies are suffering while the rest of the economy looks more stable. Many of Stripe’s customers are tech companies. Our nice little jenga tower of tech companies buying from other tech companies has been looking wobbly.
Missing the window for a public offering in 2021 won’t matter if Stripe is truly one of the core technology companies of this generation — as many investor believe. If it is, then Stripe just needs to keep growing the company and it will be fine. Amazon famously rode out the dot-com crash. Good times will come again and Stripe shareholders can harvest their riches then.
On the other hand, if Stripe is merely a company that once looked like it might have been an all-time-great but never turns out to be, then it has really fumbled the bag. Stripe’s growth is slowing and the company wasn’t profitable last year. Stripe had a frothy market for tech stocks and let it slip away. Stripe denied its shareholders an opportunity to sell at what might have been the peak.
Now, the employee share grant issue is complicating things for Stripe. It’s not exactly clear how much money Stripe would need to raise on the private markets to cover the employee share sales.
Josh Kushner’s venture capital firm Thrive Capital is making headlines for committing $1 billion to Stripe.2 We'll have to see how much other investors are willing to buy.
Even at a $55 billion valuation — that seems like a steep price to pay relative to what investors could be buying on the public markets.