Stripe, a San Francisco payments provider and one of the world’s most valuable private companies, said on Wednesday that it had raised new funding that values it at $50 billion, down from $95 billion in 2021, in a sign of how the air has come out of start-up dealmaking.
The start-up, which provides payment processing software to companies including Amazon, raised $6.5 billion in its new financing from investors including Andreessen Horowitz, Founders Fund and Thrive Capital. Stripe, which said it didn’t need the money to run its business, plans to use the funding to help employees sell their company shares and cover the taxes related to their stock compensation.
“Current and former 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,” said John Collison, a founder and the president of Stripe.
The fall in Stripe’s valuation reflects a difficult period for start-ups. Over the past year or so, as interest rates and inflation rose and the global economy began to soften, start-up funding — which had been fed by low interest rates and cheap money — declined. Many young companies have conducted mass layoffs and cut other costs. Last year, investments in U.S. start-ups dropped 31 percent to $238 billion, according to PitchBook.
Stripe had long been a darling of the start-up industry. In 2021, it surged to a $95 billion valuation after new funding, making it the most valuable start-up in the United States. But as conditions deteriorated last year, Stripe lowered its internal valuation 28 percent to $74 billion and laid off 14 percent of its employees, or about 1,100 jobs. The company explored a potential initial public offering of stock earlier this year.
Most recently, the start-up ecosystem has been rattled further by the failure of Silicon Valley Bank, a key banking institution for venture capital firms and privately held companies. Federal regulators have taken over the bank, which has a new chief executive, Tim Mayopoulos, a lawyer who has steered several banking and financial technology organizations through tough times.
“They needed cash at a bad time in the market,” Angela Lee, professor of venture capital at Columbia Business School, said of Stripe. “Because they’re so big, it’s definitely going to move future valuations. If their valuation can halve, then so can everyone else’s.”
A Stripe spokesman declined further comment.
Stripe was founded in 2010 by the brothers John and Patrick Collison. It previously raised more than $2 billion from investors.
The new funding gives Stripe breathing room amid a tough market for public listings and also helps retain employees. Many privately held tech companies use stock options to recruit workers, but a quiet public offerings market has made it difficult for employees to cash out of those shares. Some Stripe employees have stock grants that will start expiring next year, which the new funding will help provide liquidity for.
Source: NY Times
