Tearsheet PRO Newsletter: What’s going on at Stripe?
- This week, we take a dive into recent developments at Stripe – the company is looking to raise capital and it’s trying to figure out its best options.
- To say that fintech funding is down is a little bit of an understatement. So who's raising money in a down market?
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In today's edition
- What's going on at Stripe?
- Fintechs still raising money in a down market
Coming up next week
- Robinhood's attempt at growing up
- BoA/Chase/Zelle team up on digital wallet
What’s going on at Stripe?
There's no clear play in a tough market.
by ZACK MILLER
Stripe is looking to raise capital and it’s trying to figure out its best options.
- Stripe plans to use the new funds to help some veteran employees with expiring restricted stock units and the huge tax liabilities triggered by doing that.
- The company apparently wants to help some senior leaders in the firm cash out by tapping outside capital.
- “My guess is that the market for Stripe secondaries has gone down quite a bit over the last year and those employees are feeling frustrated and putting pressure on Stripe’s management to make good,” said analyst Alex Johnson to TechCrunch.
Private investors want a piece of Stripe but at a lower valuation. The company is said to be looking to raise $2.5 billion, according to the New York Times.
- Thrive Capital, led by Jared Kushner, is said to be eyeing a $1 billion investment at a valuation of $55 billion to $60 billion. Thrive is an existing investor.
- That’s down from the $95 billion the company was last valued at in its $600 million financing round in 2022.
The public option? The company is also considering going public over the next 12 months.
- It hired Goldman Sachs and JPMorgan to advise on direct listing or a private-market transaction.
- With economic uncertainty and the massive overhang of capital invested in fintech over the past few years, going public now isn’t a simple decision.
Stripe is also going through some growing pains.
- Stripe reportedly generated $12 billion in revenue in 2021 and $14.2 billion in 2022, according to The Information.
- In November 2022, the company fired about 14% (1120 people) of its staff, after ‘overhiring’.
- Stripe continues to power payments infrastructure at firms like Amazon and BMW as well as build out embeddable financial services for software platforms with its Treasury product.
The company is also cutting more enterprise deals, after years of powering the tech ecosystem.
- Stripe powers a ‘significant portion’ of Amazon’s total payments volume in the US, Europe, and Canada.
- BMW recently chose the payments company to power its ecommerce for customers and dealerships in North America.
Stripe as representative of the best in fintech. "I think that the round demonstrates two things, the first most people already know, Stripe is an incredible company. When fintech is down 80% in the public markets and over 40% in the private markets (based on data from secondary transactions relative to last round price), Stripe is only down around ~30%.
But even more importantly, this demonstrates that Stripe is a high integrity company that takes care of its employees, since the motivating factor is supporting their workers." - Rex Salisbury, Founding Partner, Cambrian Ventures.
Who's raising money in a down market?
Today, everyone wants to get a share of the pie.
by IULIA CIUTINA
To say that fintech funding is down is a little bit of an understatement.
In the US, Q4 2022 saw just around $3.9 billion of fresh capital, compared to $19.4 billion a year before, according to CB Insights.
In fact, this last quarter recorded the lowest level of funding since Q1 2018.
With investors now playing the long game of wait and see, we take a look at some of the companies that are still raising money in these difficult times.
And it looks like we have a little bit of everything - challenger banks, insurtechs, online lenders, crypto exchanges…
LA, California-based challenger bank valued at over $1.5 billion
- Closed a funding round with $55 million in equity and $358 million in convertible debt financing
- Has over 1.5 million pre-customers, including over 85,000 SMBs and over 180,000 paid current accounts
- Wants to become a fully licensed bank in the US, UK, Singapore and South Africa and launch in 2025
Decentralized crypto exchange valued at $1.7 billion
- Raised $165 million in a Series B round with participation from some of the biggest blockchain VC firms
- The exchange has supported $1.2 trillion in cumulative trading volume since its inception, according to founder and CEO Hayden Adams
- Increased adoption of decentralized infrastructure points towards a growing preference for self-custody over crypto assets in the wake of the FTX collapse, which eroded trust in custodians and brokerages
- Funds will go towards expanding existing products, improving the user experience through new web applications, developer tools and a shift toward mobile.
Digital auto insurance company valued at $1 billion
- Raised $153 million in a Series E round through preferred stock issuance with participation from seven investors
- This brings the total amount raised to $478 million since the company's inception in 2016
- The firm is regarded as an insurtech provider, a sector which uses artificial intelligence and big data to reduce costs and better target customers
- This was the only mega-round deal in InsurTech: quarterly funding in this sector dropped to its lowest level since Q1 2020
One of the pioneers of B2C online lending
- Raised $250 million of corporate debt and redeemable preferred equity, bringing its total asset-backed debt financing commitments obtained in 2022 to $1.1 billion
- Matt Bochenek, CEO of Avant, said the money will fuel their credit portfolio enabling a “stronger competitive advantage”
- Avant served over 3 million customers to date, giving over $9 billion in credit. The Avant Credit Card, issued by WebBank, reached over one million customers in January 2022
Consumer brand for renters
- Raised $150 million, taking its valuation to $1.5 billion
- The company operates a loyalty program, Bilt Rewards, that enables consumers to earn points on their rent payments with no transaction fees, while also building a path to homeownership
- It also has a co-branded credit card, Bilt Mastercard, issued by Wells Fargo
- Processed over $3 billion in annualized rent payments and over $1.6 billion in annualized card spend to date
- Bilt is profitable and has more than 500,000 active members. CEO Ankur Jain expects the customer base to grow dramatically as the company’s landlord partners direct tenants to Bilt as a primary payment platform
- Results for the quarter ending 31 Dec 2022 are in - we take a look at the two competitors' earnings disclosures.
- January 2023 stock market recap: Fintech stocks traded up in January, but still have a long way to go.
Just look at the charts
This week's reads
Deposits at U.S. lenders fell in two consecutive quarters last year for the first time in over a decade.
Like every other VC-dependent, loss-making fintech, Varo is in the midst of reorienting from “growth” to “profitability.”
It’s apparent that even well-funded companies are not immune to the challenging macro environment. In fact, doesn't it seem like it’s the most well-funded companies that are doing the layoffs?
The burden on banks to collect, maintain and analyze masses of data will be steep in 2023.
In 2023, have all of the other banks reached feature-parity? Is there any UX magic left to discover?