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Stripe cuts internal valuation by 28%
- gunapologist99 4y agohttps://archive.ph/ZnoLY https://archive.ph/ZnoLY
- nowherebeen 4y agoThat’s about 74 billion valuation. FYI.
- bentruyman 4y agoPayPal's current market cap is ~$80B. Is Stripe actually worth only $6B less than PayPal?
- nowherebeen 4y agoThat’s a good question. People in tech all know Stripe, but outside this circle, PayPal and even Square have far superior brand recognition. If you ask my family members what Stripe is, they would shrug.
- q7xvh97o2pDhNrh 4y agoI suppose you're technically correct (the best kind of correct ;) but I am not so sure that the brand-recognition metric is the best one to apply to Stripe. PayPal and Square both have a strong B2C presence. PayPal has B2C offerings focused around sending/receiving money. Square, while they don't have a strong B2C product, does spend a lot of time sticking their logo in your face every time you go to a merchant that uses Square. By contrast, Stripe is an infrastructure company. The best parallel I can think of might be a company like Maersk (one of the world's largest container-shipping companies). Sure, you may not recognize the name if you're not in the space, but odds are that they do affect your day-to-day life as a consumer.
- nowherebeen 4y agoI would define Stripe as B2B2C. It’s not simply a B2B because they help business charge customers. Their value is convincing business to use their platform. Most businesses will choose payment gateways that their customers use. And by far the number 1 request from customers is usually PayPal. They might be invisible to the customer, but business will alway prefer to integrate with payment gateways that will get customers to say yes faster. It’s nuanced, but that has just been my experience. Logically you are correct though, on the surface, brand recognition should not matter.
- q7xvh97o2pDhNrh 4y ago> I would define Stripe as B2B2C. I agree; this is more accurate. > And by far the number 1 request from customers is usually PayPal. Do you have any data on this? I'm genuinely curious. Not only do I have a long list of negative experiences with PayPal that skew my own take, but I also have no idea where to look for this kind of industry-wide data on B2B2C customer-demand.
- nowherebeen 4y agoI don’t. But I used to run a Yoga platform and used Stripe. None of my customers (Yoga instructors) knew about Stripe. They always requested PayPal or Square to the point, I realized using Stripe only made my life easier, but my customers didn’t care. It was a huge hassle to convince them a) to use my platform and b) to use Stripe. So it became 2x more difficult to onboard them. Same thing for their customers. Since I was a new platform, they ask their instructors why it wasn’t PayPal or Square. They trusted those brands to hand over their card.
- peanuty1 4y ago> Square, while they don't have a strong B2C product Huh? Block (formerly Square) has an incredibly strong B2C product (the #1 finance app on the iOS App Store and Google Play Store in the US) called Cash App (formerly Square Cash).
- rvz 4y agoOh dear. Not even Stripe is safe from the market downturn and they are cutting their valuation by 28% - from $98B to $74B. It's extremely early to write them off but perhaps they should have IPO'd in 2019. Since they didn't, they had to wait it out during 2020, 2021, etc. As long as they are profitable, then they will certainly survive this with ease. But overall, no-one is safe from this and we will see how the market tests the weakest of companies that are not profitable and completely dependent on constantly raising money.
- rco8786 4y agoI don’t envy Stripe’s position. I said as much on Twitter a few weeks ago. They put off IPO (for some reason), carried a huge internal private valuation, and have 1000s of employees sitting on paper RSUs waiting that IPO. Now it’s going to be either impossible to do or, if they force it, will be at a significant reduction of their private valuation.
- mupuff1234 4y agoIf they believe in their valuation why shouldn't they just IPO? Is it really gonna matter if they IPO at 100B or just 60b? And if they are in fact a 100B company then supposedly at some point the public market should price them "correctly".
- texasbigdata 4y agoRight. Exactly. Especially as, very likely, a person choosing to work there likely believes in the business to some extent. The counter argument would be: “the moment these get liquid I’m selling, then quitting to pursue XYZ thing” in which case the potentially lost half decade of time is a big non financial cost.
- rco8786 4y ago> Is it really gonna matter if they IPO at 100B or just 60b? Let’s ask all the employees who have been told they have $1mm in stock only to find out they in fact have $600k, etc.
- asd88 4y ago$74B is still quite high for the current market
- toomuchtodo 4y agoThe current market so far. Interest rates will rise and CC transactions will migrate over time to less costly rails starting in the next 12-18 months (although Radar, Identity, and other value add products are likely to see continued use and rev growth). Imho, Stripe should've IPO'd at the top ~12+_ months ago. EDIT: @pbriet (HN throttling, can't reply directly to your comment) In the US, Zelle does $490B worth of volume annually (2021), all CC networks combined do about $1.9T (2021). That's significant volume for a real time payment system, and it's not even fully baked within the US financial ecosystem. FedNow [1] [2] [3] rails go live next year with instant settlement, moving up to $500k in value for 5 cents (what the bank partner charges the banking customer is up to them). I expect that to move the needle, considering merchants can charge a CC surcharge per SCOTUS' Expressions Hair Design v. Schneiderman (No. 15-1391) ruling. If you compare India's UPI implementation to CC volume, the open platform is fairly successful [4], hence my thesis (and this pattern is repeated, you'll find, across other economies where a low cost real time payment system is present). CC companies are raising their rates because their margin is soon to be compressed. Ignore BNPL, that's a feature/product masquerading as a business (see: Klarna's down round, Affirms' decline in share price, etc) and regulators are coming for it [5]. TLDR A new fintech product from the Fed is likely to shift higher cost transactions from legacy payment rails to a utility product. [1] https://www.moderntreasury.com/learn/what-is-fednow https://www.moderntreasury.com/learn/what-is-fednow [2] https://frbservices.org/financial-services/fednow/community/news/012521-announcing-pilot-program-participants.html https://frbservices.org/financial-services/fednow/community/... [3] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federal-reserves-planned-instant-payments-service/ https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa... [4] https://www.business-standard.com/article/finance/upi-most-preferred-payment-mode-among-consumers-with-56-share-study-122032200874_1.html https://www.business-standard.com/article/finance/upi-most-p... [5] https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/02/02/regulators-scrutinize-buy-now-pay-later-plans https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
- paxys 4y agoShould be cut by 50%+ to be in line with the rest of the tech market, and even more if you are valuing it as a FinTech company. SQ is down 75% since its November peak.
- bpodgursky 4y agoStripe's growth is still pretty strong. I don't know why you think every tech stock has to move lockstep. Some companies are far better positioned to weather a downturn than others.
- mellavora 4y ago> I don't know why you think every tech stock has to move lockstep. Maybe because of ETFs? Maybe because of linked market psychology? I'm sure a professional trader could think of several other factors which would cause shares of companies in the same market/sector/industry would move together. Lockstep, no, but highly correlated, yes.
- rco8786 4y agoSo is Square’s growth. When the entire sector you’re in takes a 50%+ dive you have to be pretty naive to think your own valuation shouldn’t do the same.
- majormajor 4y agoI think it's extremely important to note here that June 2020-June 2022 is the bigger aberration for SQ/Block's share price than July 2022. It's extremely painful to those who bought in, or got granted shares/options, at the super-inflated prices, but it's closer to a "return to normal" than an epic crash so far. Hopefully that continues and also hopefully people recognize that, so that panic doesn't push things further down.
- TechBro8615 4y agoWhat is an internal valuation, and does Stripe actually lose anything from lowering it? My cynical experience suggests that companies usually have more to gain by lowering their valuation than they do by inflating it. Apologies if the article already described the possible negative impacts to Stripe caused by a decreased internal valuation. I’m unable to read it since it requires a subscription I cannot afford (due to inflation of course, nothing personal to the WSJ).
- sparker72678 4y agoGenerally, "Internal valuation" is the valuation used by investors while the company is still private. One way it can affect Stripe is that it makes stock options less valuable to current employees, and can influence the weight those options have in persuading new hires.
- kyawzazaw 4y agostripe doesn't do stock options. they do yearly cash-value RSU.
- dasil003 4y agoIt only makes the options less valuable if they are actually offering a liquidity event, otherwise it is actually advantageous to employees as any new option grants (both new hire and refreshers) are delineated in dollars, so a lower valuation means they get more of them. I get that this might not align with the perspective of their employees, especially if they skew young and their expectations were shaped by tech stock price dynamics of the 2010s. A lot of folks haven't yet come to terms with the new normal. From an ISO/RSU earning employee's perspective, it's better for prices to correct quickly and completely so you can start getting new grants at more reasonable valuation with real upside.
- atwood22 4y agoIt really depends. A lower valuation also means raising money will be at lower valuations, which means investors get more of the company, which means more share dilution.
- newaccount2021 4y ago
- digitalboss 4y agoJournalists don’t really grasp that nuance. ‘Lower Valuation for Popular Company’ is always a good way to get eyeballs.
- daniel-cussen 4y agoSure did grab my eyeball, down round for a company that effectively was invincible--and I met the guy, I met pc (his username here)--but full on unblemished trajectory, totally monotonic. Never heard one bad thing about him, except in my inner monologue like biting the Fruit of the Tree of the Knowledge of Good and Evil, which I do for everyone, and just barely bad, not morally bad, just unfavorable for me in particular, meaningless. Tells you how hardcore this depression is, more than anything. In particular worse for the companies than for the leaf-node employees.
- kasey_junk 4y agoThey didn’t raise at that number it’s just the new 409a value which is fine by a outside firm.
- dcow 4y agoMaybe caught your eyeball but not your brain. Your word soup doesn't hide your inability to form coherent thoughts, in fact it highlights it.
- daniel-cussen 4y agoFair.
- aetherson 4y agoIt's not a down round, which implies that they raised money at this valuation. It's a 409a valuation.
- thundergolfer 4y agoRemember that Stripe changed its RSU grant structure a year or so ago, so this won’t negatively affect newer employees. Stripe gives out a fixed amount of $$ value of stock each year now. The typical recent senior hire will get around $200k a year in stock. Now that the valuation is lower, they’ll be granted more stock units than before, which is good. Getting granted fewer stock units at a ‘fake’ higher valuation would have been frustrating. 1. https://blog.pragmaticengineer.com/equity-for-software-engineers/ https://blog.pragmaticengineer.com/equity-for-software-engin... (Ctrl-F Stripe)
- ruraljuror 4y agoThis is why many Stripes on blind are not angry. They will get more shares next year.
- radicaldreamer 4y agoThey should still be angry because this company should’ve gone public and made them liquid a year ago.
- OgAstorga 4y agoShouldn't going public on an unrealistic market cap would cause more issues than benefits? Sure, a healthy exit is ok but later pressure to recover the market cap in the short term can cause heavy structural damages inside any org.
- deleted 4y ago[deleted]
- repsilat 4y agoI think that's a more complicated explanation than necessary. If their private valuation is higher than their public valuation it means they can raise money more cheaply while private.
- fmakunbound 4y agoWhat’s the difference between internal and external valuation?
- dudus 4y agoStripe is pre-IPO so any valuation is internal given there's no public market to set a value for it. It would matter in case they try to raise capital again in the future. By lowering the valuation they make the company cheaper to invest.
- peanuty1 4y agoFidelity has its own valuation for Stripe.
- peanuty1 4y agoInternal val is the val decided by Stripe. External vals are the vals decided by external 3rd parties like Fidelity.
- beernet 4y agoScary this is just the beginning... a recession has not even started
- yomkippur 4y agoyeah if this is considered level 1, its gonna get really bad for Stripe staff's RSU
- maxpert 4y agoI think you are 6 months into recession the readouts will just make it official.
- throwaway12245 4y agoGross Domestic Product, 2nd Quarter 2022 (Advance Estimate) July 28 08:30 AM https://www.bea.gov/news/schedule https://www.bea.gov/news/schedule
- cco 4y agoCould you clarify? By any measure we're already in a recession today. I'm certainly no economist so maybe there is some other detail we're missing?
- danielmarkbruce 4y agoWhich measure are you using?
- cco 4y agoTwo consecutive quarters of negative growth plus...well the S&P is down nearly 25% over the last six months. If this isn't a recession I don't know what is.
- danielmarkbruce 4y agoWe haven't reported 2 consecutive qtrs of negative growth.
- ldjkfkdsjnv 4y agoActually 28% is nothing. Most Fintech stocks are down ~75%, this company is still wildly overvalued
- ruffrey 4y agoStripe did $12B in revenue last year. If the valuation of $95B dropped 28%, that is $68B. That seems like a fair, if not quite low valuation of a fast growing SaaS fintech company with an excellent product.
- greatpostman 4y agoYou have no idea what you’re talking about
- devoutsalsa 4y agoDepends on growth, debt, profit, cash flow, etc. Revenue in isolation means very little.
- deleted 4y ago[deleted]
- peanuty1 4y agoThe article says the new valuation is $74b. Block (Square) did over $17.6B revenue last year, an 85.95% increase from 2020. Their current market cap is below $40b and their stock is down around 70% from when Stripe raised their last round of funding.
- davidkuennen 4y agoIt will be very interesting to see what happens when all these antitrust cases against Google, Apple and the likes are over. If the verdict will be that developers can use any payment processor, Stripe is in for a huge market.
- blocked_again 4y agoWhat makes you think Google and Apple would just stick with their current rates in that case and let Stripe take over?
- nowherebeen 4y agoYeah and also lots of new competitors will join making it even more difficult for Stripe to compete. Lots of banks already have their own credit card payment processors. They simply aren’t dealing with small clients at the moment because it’s more hassle than it’s worth. Consumer fintech is due for a huge disruption and there are already a lot of startups waiting on the sideline to compete with Stripe.
- peanuty1 4y agoSo are Adyen and to a lesser extent, Block (Square).
- Heleana 4y agoThere is a private market for certain shares, and in most cases, the firm needs to give its permission before the shares can be sold. If they do, and there are eager purchasers on the market, then there won't be a problem. It is pointless if the corporation prevents every sale from occurring.
- frays 4y agoIf a Stripe employee has $100,000 worth of RSUs and leaves Stripe now, what happens to their RSUs? Stripe has double-trigger RSUs which won't vest until after IPO. Do they get to keep these RSUs until after the IPO + lockup period, even though they're not employed at Stripe anymore? (Is there another name for RSUs owned by someone not employed by a company anymore? e.g. unvested shares?)
- paxys 4y agoThey get to keep the vested RSUs (first trigger) when they leave the company.