Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.
Stripe is in no rush to go public after the $65 billion payments company returned to positive cash flow and raised its valuation on the private market.
The company, a Silicon Valley leader, told its investors on Wednesday that it processed more than $1 trillion in payments last year, up 25 percent from 2022, helping it recover from a painful period during which its valuation was cut in half.
“2023 was a big year. We hit the double milestone of $1 trillion in payments volume and positive cash flow,” said John Collison, co-founder and president of Stripe. “We don't disclose historical financials, but it's clear that Stripe has been in Construction status up to this point.”
The company, headquartered in San Francisco and Dublin, is among the most valuable private companies in the United States, along with Elon Musk's SpaceX and artificial intelligence company OpenAI.
Stripe has been a symbol of the boom and bust of venture-backed companies in recent years — its valuation soaring to $95 billion during what Collison described as the “peak madness of 2021” before its valuation was cut to $50 billion last year. Last month, Stripe's private market cap rose to $65 billion.
Stripe's public listing has long been anticipated among venture backers who will be in line for big payouts and other startups looking for clues about how they will perform in the public markets. But Collison said he and his brother Patrick, the company's CEO, have no plans to go public while public markets remain volatile.
“With an IPO, we are not in a rush. Profitable companies have many more options than companies that rely on outside capital,” Collison said in an interview with the Financial Times.
This means the company must find other ways to allow employees and early investors to cash out their shares, which have risen sharply in value. Last month, Stripe arranged the sale of about $1 billion in employee stock, and Collison said he wants to ensure employees have a chance to cash out each year.
In 2023, Stripe raised $6.5 billion from venture capital investors including Josh Kushner's Thrive Capital, Andreessen Horowitz and Peter Thiel Founders Fund, in a private equity sale that was one of the largest equity sales ever in the United States. The sale allowed the company to pay billions in tax liabilities associated with its employee stock units.
“You're starting to see this a little more with pre-IPO companies [such as] “OpenAI, Canva, SpaceX: private companies offering tender offers to employees who tend to take more concentrated positions in company stock,” Collison said.
Canva, an Australian graphic design platform, is about to complete its tender offer that is expected to value the company at about $26 billion, according to Cameron Adams, the company's co-founder. Canva initially planned to sell roughly $1 billion worth of stock, but raised the total to more than $1.5 billion after it was oversubscribed in the bidding, Adams said.
Launched in 2011 by the Collison brothers, Stripe's core business is building payments infrastructure for startups and more established enterprises. The fintech group has also developed a range of tools to assist clients with revenue, taxes and invoicing. “We expect the group’s annual revenue run rate to exceed $500 million over the next year,” Stripe told investors on Wednesday.
Recommended
Stripe did not disclose total revenue, but according to a person familiar with the matter, its net revenue was about $1 billion in the third quarter of last year. The company was incurring losses in 2022.
Many venture-backed companies have avoided returning to investors who gave them money as the market peaked in 2021, mindful that any new capital would likely come at a lower valuation. But some are now suffering from a lack of liquidity. According to industry groups, as many as two-thirds of venture-backed startups will need to raise money this year.
“The mistake would be for private companies to refuse to acknowledge market realities. . . . Companies are doing themselves no favors by skewing valuations from the fundamental value of the company,” Collison said.
This article has been modified as Stripe initially indicated that it had turned cash flow positive for the first time. Following the publication, Stripe explained that the company had achieved this feat in the past.
