The Big Story

Is Stripe really worth $115 billion?

Well, that's what transactions in a secondary market are showing. Even though secondary trades can value companies differently than direct primary investments, Stripe's valuation is reportedly up more than threefold since its last funding round in April 2020.

• Stripe's major customers — including Amazon, which was revealed in 2017, as well as fast-growing companies like Zoom and Shopify — have solidified its position in the industry. Other customers include Slack, Wayfair, Maersk, Atlassian, Deliveroo and Grab.
• If Stripe is valued above $100 billion, it would be the world's second-highest valuation of a venture-backed private company after only ByteDance, according to CB Insights. Even at its last official valuation of $36 billion, it's the most highly valued fintech startup, ahead of Brazil's Nubank, India's Paytm, the U.K.'s Checkout.com, Chime and Robinhood.

So the 10-year-old startup could be worth more than IBM, the nearly 110-year-old tech company with a market cap of about $107 billion.

• "It's high. There's now way to pretend that they're not high," Rob Siegel, a Silicon Valley investor and management lecturer at the Stanford Graduate School of Business, told Protocol. "There's this absolute premium in this class of companies that, according to fundamentals, you'd scratch your head and say, 'seems like valuations are high.'"
• Then again, we're talking about a really hot startup in a very hot space, Siegel said. Payments infrastructure was already a rapidly-growing market before the pandemic. COVID-19 accelerated that growth. And it's a space where Stripe is arguably growing faster than competitors.

The excitement is about Stripe's vision. It's known for its developer-friendly payments processing, which allows companies big and small to quickly enable online payments. But the company is not content to stop there.

• In April 2020, it opened up its issuing product for branded cards to U.S. customers.
• Then in December 2020, it launched Stripe Treasury, a banking-as-a-service offering, which enables companies to offer its merchants financial products, such as interest-earning accounts eligible for FDIC insurance. Customers can have "near-instant" access to revenue generated using Stripe, spend it with a card, send it via ACH or wire transfer, or pay bills. Stripe added Goldman Sachs and Evolve Bank & Trust as U.S. partners and Citibank and Barclays as global partners. Customers include Shopify, which is offering business accounts for its merchants.
• In other words, Stripe wants to do far more than process transactions: It wants to be the underlying infrastructure for global payments.

"Their plan is to be the AWS of money, for sure," said Shamir Karkal, co-founder and CEO of fintech startup Sila, who previously sold digital bank Simple to BBVA.

• "I think unequivocally Stripe is one of the long-term winners" in this space, Siegel said. "This is a company that is processing hundreds of billions of dollars per year. It's a very well run company [with a] spectacular leadership team, and they've executed flawlessly. … Everything I hear about this company [says] they continue to be killing it."
• IDC President Crawford Del Prete said "the interest in Stripe is being driven by a change in customer behavior around payment platforms." "Payments are an area where COVID-19 has accelerated change and investment on the part of retailers," he told Protocol. "In many ways we expect these changes to be largely permanent or directionally permanent. "
• Constellation Research's Ray Wang echoed this view. The reported Stripe valuation is "justified in this market," he told Protocol, citing the dramatic impact of COVID-19 on fintech and the payments infrastructure space in particular.
• "A year ago, they'd be lucky to be worth $60 billion," Wang said. Today, Stripe is "a critical part of the post pandemic story where ecommerce payments, decentralized finance and the transformation of banking is happening in front of our eyes."

Still, that $115 billion is making some experts nervous, especially given tech's history of overhyped valuations.

• "I think these pre IPO private markets have gotten out of whack," Santa Clara University law professor Stephen Diamond, a longtime Silicon Valley observer, told Protocol.
• Diamond has been a prominent critic of new rules that enabled startups to disclose less information as they begin the process of going public. "These private secondary markets are low-information markets," where startups are not subjected to the same regulatory oversight, he said.

In the end, this is about what investors believe here and now. "Are they overvalued?" Siegel asked. "Well, a company is worth what someone is willing to pay for it. Not a penny more or a penny less."

• "Will they stay at this $115 billion valuation? Will it grow higher? None of us know for sure," he said.

A MESSAGE FROM BROADRIDGE

The future is positively digital. Ready? Consumers, investors and shareholders are savvier than ever. Everyone needs to create more engaging experiences that keep pace with today's new expectations. See how you can stay ahead with next-gen technologies that deliver on what matters most. We can help.

From Protocol | Fintech

Intuit's CEO's journey of disruption: Sasan Goodarzi explains how the tech company has survived and thrived by adapting quickly to major shifts in the market. Intuit is doing that now as it navigates the fintech revolution.

How will tech shape retail investing? Key fintech executives, including Wealthfront CEO Andy Rachleff and Freetrade CEO Adam Dodds, discuss in Protocol Braintrust.

Overheard

• "One must ask: What happens when an advertising company — armed with the terabytes of data points it has harvested from our personal emails, location data, song preferences and shopping lists — now wants to be our bank?" —Urban FT CEO Richard Steggall has privacy concerns about Google's bid to expand in financial services.
• "I was seeing lots of young people whose first encounter with credit is buy now pay later, but they aren't familiar with the risk of the product[s] or how to use them well." —Go Fund Yourself founder Alice Tapper on launching a campaign to regulate "buy now, pay later" in the U.K.
• "I don't think that Bitcoin … is widely used as a transaction mechanism. To the extent it is used I fear it's often for illicit finance. It's an extremely inefficient way of conducting transactions, and the amount of energy that's consumed in processing those transactions is staggering." —It's fair to say that Treasury Secretary Janet Yellen isn't a fan of Bitcoin.
• "When you have all of the emotional and intellectual stress of something like Monzo, to be honest, going back home and moving a bale of hay or shovelling up some alpaca shit was very welcome indeed." —Monzo co-founder Paul Rippon on leaving the challenger bank to focus on his family's alpaca farm.

Three Questions With...

Brian Dammeir, North America President of Adyen

What was your biggest blunder and what did you learn from it?

Not following mine and my team's instincts when it comes to people, especially for hiring. Assessing someone's strengths and weaknesses goes beyond their more easily quantified ability to do the role; instinct usually drives our ability to understand how someone will do their role. The easiest mistakes to make in leadership are around culture and not putting enough focus on getting the right mix of people on your team. In this, I learned that some of the most valuable time I spend in leadership is in hiring the right people, challenging my team to include different voices in their team and keeping an innovative culture.

What fintech trend are you most excited about?

The seemingly exponential growth of ecommerce and cashless payments. Ten years ago, about 5% of transactions in the U.S. were online. Projections show that even before COVID-19, the U.S. had gone over 20% of transactions. This matters for pure ecommerce players, but importantly we find that channels are converging for multi-channel companies.

What fintech trend are you most worried about?

Transparency and choice are key pillars that make any industry successful. Fintechs should offer products that solve consumer needs, but do so in a transparent way, making fees and data access clear to the user. Next to being transparent, consumers should also have choice, using that transparency to make decisions that make sense for them. This is why it's important for the fintech segment to have a thriving ecosystem of players, all with different strengths and consumer value-adds. Going forward, we must ensure that the fintech segment overall embraces these two important themes.

Need to Know

• Brex is launching a bank. The San Francisco startup, which offers credit card and cash management services to businesses, said it has applied for a charter with the FDIC and the Utah Department of Financial Institutions to establish Brex Bank, an industrial bank to be based in Draper, Utah. The bank will be a wholly-owned subsidiary of Brex.
• Broadridge unveiled its wealth management marketplace. The investor communications technology company's platform helps wealth managers connect with banks and other financial institutions. Bancorp signed up as an inaugural funding partner.
• Despite the pandemic, boomers still love physical banks: 75% of baby boomers visited a physical bank in the last 12 months, compared with 63% under the age of 55, per a survey by Oxygen Banking. Meanwhile, 93% of Americans under age 55 use a mobile banking app, compared to 64% of boomers. That's either room to grow for startups or a roadblock to further growth.
• TransferWise is now just Wise. The money-transfer company, which was recently valued at $5 billion, is rebranding ahead of an expected IPO.
• Apex Clearing is going public. The clearing and digital custodian company, which provided clearing services for Robinhood until 2018, is headed to the markets via a SPAC through a merger with Northern Star Investment Corp II that values the combined entity at $4.7 billion.
• MoneyGram is leaving Ripple's platform. The firm said it had suspended trading there due to the uncertainty related to an ongoing legal battle with the SEC.
• Even named a former Lyft exec as its CEO. The early wage access company named David Baga as CEO, who was chief business officer at Lyft before being COO of Lightspeed Venture Partners.
• Kinara Capital raised $10 million in debt financing. The India-based, socially-responsible small business financing company secured the financing from IndusInd Bank with 100% guarantee from the U.S. International Development Finance Corporation.
• EquityBee raised $20 million. The Silicon Valley-based employee stock options funding platform secured the Series A funding in a round led by Group 11.

A MESSAGE FROM BROADRIDGE

The future is positively digital. Ready? Consumers, investors and shareholders are savvier than ever. Everyone needs to create more engaging experiences that keep pace with today's new expectations. See how you can stay ahead with next-gen technologies that deliver on what matters most. We can help.