Stripe IPO: What do we know about the Stripe IPO?
Stripe's IPO has been one of the most heavily anticipated listings of the past few years, but with ongoing market volatility the date of its public offering has continuously been pushed back. Now the company has said it is going public officially, and given itself a one-year deadline to decide how and when.
The company has hired Goldman Sachs and JPMorgan Chase to advise on the timing of an IPO and the best way to do so. It's likely that the company won't opt for a traditional IPO, as the company doesn't need to raise any additional funds. The listing is a way to give existing shareholders the chance to sell their shares and for new shareholders to buy in to the company. That's why it's more likely we'll see Stripe go public via a direct listing.
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How much is Stripe worth?
Stripe was valued at as much as $95 billion in a funding round in March 2021. However, as fintech valuations have fallen across the board this is likely to change by the time Stripe holds its IPO. If the company chooses to list via an IPO, it would raise around $2.5 billion, which could value the company at around $55 billion to $60 billion. This is largely due to rising interest rates and a slowing down of the economy - as well as Stripe announcing layoffs and cost cutting which has caused its private share price to decline.
While John Collision - the co-founder of Stripe - said he was unsure whether the company could still justify that $95 billion price tag in the current economic climate, he did say that based on their fundamentals, they still grew 60% in 2021.
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What does Stripe do?
Stripe is a San Francisco-based financial services company with a focus on online payments solutions, as well as APIs for e-commerce players.
The company was started in 2009 by Irish-born programming brothers John and Patrick Collison. The pair sought to improve on the existing payment processing offering for businesses, seeking a solution to the outdated legacy systems of banks and the developer integration shortcomings of PayPal.
After selling a software-as-a-service (SAAS) business for $5 million in 2008, the pair raised initial seed funding of more than $2 million from Y Combinator in 2010 and 2011. Further investment came from the likes of PayPal founders Elon Musk and Peter Thiel, which allowed Stripe to emerge from its beta and launch officially in September 2011.
In 2012, the company raised $18 million in its Series A led by Sequoia Capital, which allowed it to flesh out the team and progress its plans to expand outside the US, with a Series B of $20 million following just months later. In 2014, $80 million was secured through a Series C which brought about further international expansion beyond the 12 countries in which Stripe operated.
By the next year, the company was ready for nine-figure raises, securing $100 million in 2015, $150 million in 2016, and $245 million in 2018. By this point, the company had built a global reputation for disrupting how businesses collect funds online, having diversified its range of services to include Stripe Issuing, Stripe Terminal, and its Radar fraud detection offering.
The company would raise a further $950 million in 2019 and 2020 alone, with a $600 million round in 2020 coming during coronavirus lockdowns, during which time the company grew further amid a boost in online shopping.
By the latest $600 million raise in 2021, Stripe had built revenues reported to be $1.6 billion for 2020. But it's now estimated to have $12 billion in revenue as of 2021.
How does Stripe make money?
Stripe makes money mainly through transaction fees, with the company processing hundreds of billions of dollars each year for its clients. Fees are split between payments, covering online transactions, billing, for subscriptions and invoicing, connect, for clients that need to pay third-party sellers, and terminal, for in-person point of sale payments.
Additional revenue streams for the company include business loans through its Stripe Capital service, the Radar product to help businesses detect and identify fraudulent charges, and custom reports focusing on finance and data analysis.
What is Stripe's business strategy?
Stripe’s business strategy from the beginning was, broadly, centred around making payment processing easier for its professional clients by delivering a product that was more attuned to customer needs than PayPal. Simple, borderless and programmable payments was the order of the day.
The goal to eclipse PayPal for functionality was approached in a somewhat unconventional way when the Collison brothers not only met with PayPal founders Elon Musk and Peter Thiel, but convinced them to invest in their business.
Such association helped inspire venture capital firms to provide their backing, leading to a series of funding rounds totalling $2.2 billion as of August 2021. In turn, the investment allowed the company to make the right hires to further its international expansion, culminating in a presence in 44 countries and growing.
The company’s focus on customer experience extended not only to its clients, but the clients of its clients. To this point, the interface of a site using Stripe’s payment system remains uncluttered by third-party branded workflow, preserving a clean user experience.
In addition to diversifying its own revenue streams, the company has made a series of strategic acquisitions such as authentication solution Bouncer, cloud-based tax service offering TaxJar and, in a bid to expand into Africa, the Nigerian payments provider Paystack in 2020.
Is Stripe profitable?
Stripe is reportedly profitable based on its 2020 EBITDA figures of $120 million. However, the company does not disclose detailed financials that provide comparison to prior years’ accounts. As mentioned, its most recent revenue reports are from 2021, which state it has $12 billion in revenue, which is up around 60%.
Who owns Stripe?
The ownership of Stripe is split between a range of individuals, such as the Collison brothers who founded it, and investment institutions such as Sequoia Capital and General Catalyst that contributed to financing rounds. The exact equity split is not currently in the public domain.
Who are Stripe’s competitors?
Stripe’s main competitors are the likes of PayPal and Block. PayPal’s IPO in 2002 valued the company at $1.5 billion, a mark that swelled to north of $360 billion by 2021. While PayPal is more established as a brand, Stripe is generally recognised to have a more innovative range of features based on its developer tools.
Founded in 2009, Square is known for its utility in mobile payments processing, while Stripe is more aligned with internet payments. Square IPO’d well ahead of Stripe, raising $243 million for a valuation of some $2.9 billion in 2015. Square is reportedly worth around $120 billion in 2021.
Board of directors of Stripe
- John Collison – President
- Patrick Collison – Chief Executive Officer
- Claire Hughes Johnson – Chief Operating Officer
- Dhivya Suryadevara – Chief Financial Officer
- Billy Alvarado – Chief Business Officer