Online payments processor Stripe, Inc. may be in the same niche as PayPal and Square, but they’re not the same beast. Stripe is potentially preparing for an IPO (initial public offering) in the near future, giving it the opportunity to vie for public capital against its competitors, too. Although an IPO date hasn’t been set or announced, Stripe’s massive valuation could put it on track to debut one of the biggest IPOs in history.
Stripe is far from dire straits—so the capital would just be an added bonus. Because of that, they could pursue a direct listing, according to some sources.
- Two Irish brothers, Patrick and John Collison, founded Stripe in 2011.
- Millions of businesses across the world use Stripe to manage payment services.
- Stripe offers loans, tax assistance, and buy now, pay later plans with partner companies.
- The company continues to grow and plans to expand into regions including the Middle East and North Africa.
- An IPO and the details thereof haven’t been made public yet, but the company has hired a law firm to handle the legal preparations of the IPO process.
- Stripe’s most recent venture capital funding round raised its valuation to $95 billion, which could lead to one of the largest IPOs.
A quick company history of Stripe
The founders of Stripe, brothers Patrick and John Collison, created the company a decade ago. It has headquarters in both Dublin, Ireland, and San Francisco, California.
Stripe’s core product is payment processing, and scores of businesses use it—including the most recognizable names. From startups to Fortune 500 companies, some of Stripe’s customers include Zapier, Slack, Google, Instacart, Amazon, and Shopify. Businesses in over 120 countries use Stripe to help facilitate commerce and growth.
The payment platform is designed for any company to be able to use and scale as needed. Within the payments processing, Stripe offers revenue management apps, fraud prevention, and a cloud-based infrastructure. It also offers BNPL (buy now, pay later) services, which are trending as firms like Afterpay and Affirm go public.
Here are some key events in Stripe’s recent history:
- September 2019: Stripe launched Stripe Capital, its business lending arm.
- August 2020: Dhivya Suryadevara came on as Chief Financial Officer, leaving the same position at General Motors. New CFOs often signal IPOs are underway.
- May 2021: Stripe announced carbon removal purchases from 6 projects as part of its Stripe Climate initiative.
- June 2021: Stripe launched Stripe Tax to guide businesses through global tax compliance rules, and Stripe Identity, for online user verification.
And in 2021, The company captured the #2 spot on the CNBC Disruptor 50 list (after coming in first place in 2020).
CFO Suryadevara said this past spring after its Series H funding round, “We are in a hyper-growth industry and within that, the company itself is experiencing hyper-growth.”
Stripe’s private fundraising rounds
Stripe has, to date, raised a whopping $2.2 billion in funding. Here’s a glance at the major funding the company has completed over the years.
- Seed Round: From Y Combinator in August 2010
- Seed Round: In 2011, Stripe held a $2 million seed funding round led by Sequoia Capital.
- Series A: In February 2012, the Series A from Sequoia Capital was worth $18 million.
- Series B: Sequoia Capital, Redpoint Ventures, Founders Fund, and others invested $20 million in July 2012.
- Series C: January 2014 was a Series C for $80 million.
- Series C: Investors added $70 million more in December 2014.
- Series C: Stripe raised another $100 million in July 2015.
- Series D: In November 2016, Stripe raised another $150 million. Leading this investment round were CapitalG and General Catalyst.
- Series E: The company’s Series E took place in three steps starting September 2018. Proioxis Ventures Fund, Tiger Global Management and others brought in $345 million.
- Series G: Stripe conducted a dual-part Series G funding round starting in September 2019. Andreessen Horowitz, General Catalyst, and others brought in $850 million.
- Venture Round: They raised $1 million in May 2020.
- Series H: Stripe underwent a $600 million funding round that brought the company’s pre-money valuation to $94.4 billion.
Stripe also raised funds through the secondary stock market.
Path to the Stripe IPO
Stripe co-founders Patrick and John Collison have not officially indicated plans to go public. However, the company has been raising massive amounts of money. The COVID-19 pandemic also fueled growth, with many businesses turning to Stripe to fill their sudden need to build online payments capabilities.
Other business segments the company has been focusing on include additions of new programs such as Stripe Identity and Stripe Tax.
Stripe has also been actively investing in other fintech startups and has taken on a few acquisitions of its own. It has invested in corporate card issuer Ramp and teen-focused payments and banking app Step. Other investments this year have been in Pico, Safepay, Accord, and Balance.
In 2021, the company made two big acquisitions: TaxJar and Bouncer. Past acquisitions include Paystack, Index, and RunKit.
The company’s recent hiring of a law firm is presumably for the purpose of IPO preparation, and its next step would be to hire investment banks to proceed with the financial details.
When is the Stripe IPO date?
Most sources seem to agree that if and when Stripe does go public, it won’t happen in 2021. Having just recently engaged the services of legal firm Cleary Gottlieb Steen & Hamilton, the corporation is in the very earliest stages of a potential IPO, even considering the quicker processes of a direct listing.
Some say due to its massive valuation, Stripe doesn’t need the capital and could pursue a direct listing instead of a traditional IPO. A direct listing involves offering current investors the chance to sell shares without being bound by a lockup period.
John Collison, Stripe’s president, was vague regarding a potential IPO in a recent Bloomberg Television interview. He noted that there were no plans yet to become publicly traded. A 2022 outlook could be a possibility.
Risks and opportunities for Stripe stock
Despite wild innovation, Stripe’s market remains largely untapped, leaving room for plenty of growth. It has a history of strong leadership. Plus, it doesn’t only offer payment processing, but a host of other valuable services to diversify its product line. That trajectory is bound to continue.
Stripe generates a large amount of business through Shopify, and the company’s dependence on it could be a problem. Moreover, fintech brands pose higher risk for online fraud and data breaches. And Stripe’s enormous valuation means the company would need to prove it can continue to grow post-IPO.
Stripe holds a strong segment of the payments-processing market in spite of competition from the likes of PayPal, WePay, and Square. It has steadily grown to attain one of the largest valuations in the fintech space and across all company types. Keep an eye out for what would be a huge IPO, possibly in the near future.