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The Public Markets Are Sizzling Hot—Here’s Why Stripe Is Skipping The Party

Jeff Kauflin

Over the past year, the stock market has gone wild for newly public fintech companies, greeting them like Beatles fans in the late 1960s. In January 2021, Max Levchin’s buy now, pay later business Affirm went public and shares nearly doubled, making the company worth $24 billion after being valued in the private market for $5 billion just four months prior. Last summer, a little-known North Carolina online banking company called Ncino went public, and its stock rose 195%, marking the biggest “IPO pop” for an American tech company since August 2000. 

Yet Stripe, the 11-year-old San Francisco business that lets companies accept online payments, is skipping the party and staying home. It has raised $600 million in new funding at a $95 billion valuation, becoming the most highly valued startup in America.  

The simplest reason why it’s staying private is because it’s more work to go public, say multiple industry investors. The “hamster wheel” of having to report quarterly financial results eats up executives’ time and focus, and it invites more accountability and scrutiny. Typically, startup investors pressure companies to go public or get acquired within a decade, because that lets VCs sell their shares and distribute the proceeds to their own investors. But Stripe’s growth and size have given it more control to do whatever it wants. And it’s backed by investors like Sequoia who are known for being unusually patient. 

Stripe is so big that it doesn’t need $600 million in cash. Why raise the money at all? The dollars can help fuel acquisitions, fintech investors say. Outside of payments, Stripe has been building banking-as-a-service products like small business bank accounts, and it could be eyeing a related acquisition. In October 2020, Stripe bought Nigerian payments company Paystack for a reported $200 million, showing an appetite to expand through acquisitions. A Stripe spokesperson said it will use the $600 million to invest in its “enterprise business” of larger customers and in European operations. 

Another reason to raise the money: nearly tripling your valuation in three years shows exceptional progression. It’s a marketing signal Stripe can use as it hires talent, and it barely dilutes the value of the shares that the founders and employees already hold. Forbes estimates that cofounders Patrick and John Collison are now worth $9.5 billion each, up from $3.2 billion before the new fundraise. 

One big, remaining question is what Stripe does to help employees with liquidity. Some staffers probably want to sell their shares to buy a house or pay for their kids’ college. Secondary market platforms like SharesPost and EquityZen let people sell private-company shares, and secondary-market sales have become increasingly popular. But companies can restrict those sales, and it’s not easy to sell small stakes. On SharesPost, you need to sell at least $100,000 in stock to use the platform at all. That’s fine for people who have been at Stripe for a decade and are sitting on millions of dollars’ worth of stock, but for the rank and file engineer who has been there for four years, it might not be as helpful. Stripe declined to comment on how it helps workers solve this problem.

Another interesting question is what the stock market will look like when Stripe ultimately decides to go public, perhaps over the next year or two. With valuations at all-time-highs and short sellers starting to bet against SPACs, perhaps Stripe can sidestep the next market correction before it goes public and starts facing all of that investor scrutiny.


