The bar's annual message Provides an outline of a business that is healthy and growing. The bar is large enough that when we consider its growth, we have to compare it to the overall growth in the payment space overall. By this measure, the company is outperforming its market.
Key growth points
In its annual letter, Stripe noted that it surpassed the $1 trillion measure of total payment volume in 2023, a large and round number, if imprecise. This threshold is certainly notable, but when combined with recent growth numbers it becomes even more impressive. In 2023, its payout volume increased by 25%, Stripe said. If the company actually processed precisely $1 trillion last year, that would imply $800 billion in 2022, and a $200 billion gain from TPV in one year. At the size of Stripe, it's a great result.
Remember, Stripe's fee structure starts at 2.9% with a 30-cent surcharge for domestic card-based transactions, which even when accounting for volume discounts suggests that the amount of payments added last year has added up to massive new revenue for the private company.
These revenues translate into cash flow, a critical metric for investors. “Cash flow was strongly positive in 2023 and is expected to bounce back in 2024,” the company said in its annual letter, meaning it likely doesn't need to raise more capital before going public. This may be part of the reason why it is not seeking an IPO in the near term: public offerings are fundraising mechanisms, and Stripe is currently launching funds, which limits its need for more capital.
Two other data points emerged.
First, there are now 100 companies using its service that process $1 billion or more annually using Stripe. These companies make up about 10% of its total payment volume, which implies some focus on customers — a concern for some investors, though it doesn't cross our risk radar — but more importantly means that Stripe has been able to retain large accounts over time. Any business that processes this total volume of payments through Stripe can create its own internal stack, or pursue a more DIY option. The fact that many large accounts are committed to Stripe means that customers will not necessarily “graduate” from the payment services offered, which bodes well for future growth and revenue stability.
Second, offerings that fall into the “Revenue and Financial Automation” group are expected to reach an annual run rate of $500 million this year — tools that help companies manage invoices, taxes, and recognize revenue. This run rate will be enough for this business unit to be a publicly traded company in its own right. This not only gives Stripe a broad process on the payments side, but also a programmatic story that can be told beyond that core process. Revenue diversification that opens the door to fast-growing, potentially high-margin revenue is catnip for an investor. Expect this topic to come up when Stripe eventually goes public.
Startup success is surprising
We continue to see venture capital funding at record lows. However, Stripe says this doesn't stop people from starting new companies. It has already seen record startup foundings in 2023. The US is leading the way, but there have also been big strides in Canada, the Netherlands and Sweden, according to the company.
These startups find success even without venture capital backing. For example, startups founded in 2022 (the most recent full year of Stripe data) were 60% more likely to start raising revenue within their first year, while they were 57% more likely to process $1 million within their first year, compared to With those that were established in 2019, according to the company.
This is impressive considering that 2023 started with some people saying that the predictions for startup success that year would be frequent reassessment of budgets and plans and a path to breaking even.
Stripe also toots its own horn when it notes that one in six new businesses in Delaware integrate with Stripe Atlas. Of these, more than 50,000 people were working to earn $5 billion in revenue annually.
the future
Overall, it's been an interesting year for Stripe, which is now worth $65 billion. As much as we expect a Stripe IPO soon, that's unlikely to come for at least another year.
It made a somewhat unconventional acquisition of OK, a startup that developed low-code analytics software to help engineering leaders better understand how their teams are performing. Mary Ann Azevedo wrote about it: “Stripe's decision to acquire a startup that helps engineering leaders build performance dashboards to measure how their teams are performing makes it seem like the company is very serious about making sure its engineering team is working effectively enough to not only move faster, but also… More productive.”
“Relationship” was also a big theme in Stripe's letter. The company provided ample examples of how it continues to provide services to help businesses build closer relationships with their customers and improve the overall payments experience.
Additionally, Stripe goes on to say that the company is still early in its journey. It aims to “be the most reliable part of the business group.” That's a lofty goal, but its growth so far suggests that customers find it delivers on that goal well enough.
