Irish payment processing platform Stripe has secured over $6.5 billion in a Series I funding round, at a valuation of $50 billion. Notably, this is a steep plunge from its previous valuation of $95 billion back in 2021. Earlier this year, Stripe announced that it had internally reduced its valuation to $63 billion in January.
The fresh round was funded by existing Stripe shareholders – Andreessen Horowitz, Baillie Gifford, Founders Fund, General Catalyst, MSD Partners, and Thrive Capital. It also saw participation from new investors – GIC, Goldman Sachs Asset and Wealth Management, and Temasek.
The funds will be used to provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, thereby resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors. Furthermore, it noted that it does not need this capital to run the business.
John Collison, Co-Founder and President of Stripe, said, “Over the last 12 years, current and former employees of Stripes have helped build foundational economic infrastructure for millions of businesses around the world, and this transaction gives them the opportunity to access the value they’ve helped create. But the internet economy is still young, and the opportunities of the next 12 years will dwarf those of the recent past. There’s so much to discover and to create. For us, it’s now back to work.”
Josh Kushner, Founder and CEO of Thrive Capital, said, “Stripe’s strategy is inherently indexed to secular trends that will only compound for decades to come: the growth of the internet economy and the trajectories of the world’s most innovative and forward-looking companies. Stripe will continue to be at the epicenter of every new technology current, and is the de facto choice for the businesses and builders that are creating the future. This is why we first invested in Stripe in 2014, and why we are proud to deepen our partnership.”
Down round at Stripe!
Founded by brothers Patrick Collison and John Collison in 2010 in Ireland, Stripe cut its internal valuation by 28%, which is $95 billion to $74 billion in 2022. Earlier this year, it again lowered its valuation to $63 billion. This move reflects dramatic the pullback in tech stocks last year, Nasdaq’s worst year since 2008. In addition to the cut in its valuation, Stripe announced a layoff of 14% of its workforce in November.
Stripe’s capital raise results in a down round, which indicates a scenario where the funding fetches a lower valuation for the company than the previous fundraise. Down rounds can be an opportunity for founders to get their metrics and path to profitability in order.
With a down round, Stripe can scrutinise profitability and cash burn more closely. As the company aims to go public after turning profitable, the IPO might not happen this year. Notably, Swedish buy now, pay later giant Klarna also had to take a down round in 2022.