Stripe raises $6.5B to provide liquidity for past and current employees

Digital payments company Stripe announced on Wednesday that it had raised over $6.5 billion in Series I funding to value the company at $50 billion, about half its valuation two years ago.

Stripe noted that it “does not need this capital to run its business”, but it intends to use the proceeds to “provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors.”

The latest raise is from existing investors, venture capital giants Andreessen Horowitz, Peter Thiel’s Founders Fund, Baillie Gifford, MSD Partners and Thrive Capital. and General Catalyst. New investors in the round include GIC, Goldman Sachs Asset and Wealth Management and Temasek.

“Over the last 12 years, 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, cofounder and president of Stripe.

“But the internet economy is still young, and the opportunities of the next 12 years will dwarf those of the recent past. There’s so much to discover and to create. For us, it’s now back to work.”

The latest raise gives the San Francisco and Dublin-based group enough new capital in a challenging funding environment to cover the billions of dollars in tax liabilities related to employee stock units, but it also results in a new valuation of $50 billion, which is significantly lower than its peak of $95 billion in 2021.

The deal, one of US history’s largest private stock sales, is a clear signal that tech startups may need to accept significant discounts to raise money. The capital round by Stripe is an example of what is referred to as a “down round”, in which the company receives less money than it did during a prior fundraising round.

It’s been an interesting time for the company, valuation-wise. Two months ago, TechCrunch reported that it had cut its internal valuation to $63 billion. That 11% cut came after an internal valuation cut that occurred six months prior, which valued the company at $74 billion. In between, Stripe laid off 14% of its staff, or around 1,120 people, in November.

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More on Stripe’s latest round

Investors have become warier as the US Federal Reserve’s monetary tightening drains out surplus money after years of writing large cheques for high-flying startups. The scrutiny of startup indicators like profitability and cash burn has increased recently. A down round was also required of Swedish purchase now, pay later juggernaut Klarna last year.

Stripe became Silicon Valley’s most celebrated start-up with investments from prestigious venture funds. It rose dramatically during the boom times and is now viewed as an industry bellwether; the magnitude of its valuation decrease is likely to serve as a benchmark for other start-ups.

“Stripe’s strategy is inherently indexed to secular trends that will only compound for decades to come: the growth of the internet economy and the trajectories of the world’s most innovative and forward-looking companies,” said Kushner, founder and chief executive of Thrive Capital.

But many of its most well-known customers, including the maker of electric vehicles Rivian, the online retailer Affirm, and the software developer GitLab, have been hit hard by the current tech slump.

Stripe was looking to use the funds to cover a tax bill and does not need the capital to run its business, the company said.

The parent company of Nigerian fintech, Paystack, has been aiming to turn profitable before going public but is unlikely to launch an initial public offering this year, Reuters reported last month.

Stripe Acquires Paystack for $200M+, the Biggest Ever Startup Acquisition in Nigeria