Digital payments company Stripe has raised $6.5 billion in Series I funding from existing investors including Andreessen Horowitz, Founders Fund, Baillie Gifford, MSD Partners, Thrive Capital, and General Catalyst. The round also saw new investors such as Goldman Sachs Asset and Wealth Management, Temasek, and GIC joining in. This funding has lowered Stripe's valuation to $50 billion, from its peak of $95 billion in 2021.
Stripe plans to use the funds to provide liquidity to current and former employees, address employee withholding tax obligations related to equity awards, and retire Stripe shares that will offset the issuance of new shares to Series I investors. The company has made it clear that it does not require capital to run its business.
This fundraising is one of the largest private stock sales in the US and is an example of a “down round,” where the company receives less money than it did in the prior fundraising round. This indicates that tech startups may need to accept significant discounts to raise money. Stripe's acquisition of Nigerian fintech, Paystack, is notable as it aimed at enhancing its payments capabilities in Africa and increasing its presence in the region.
Despite the drop in valuation, Stripe remains an industry bellwether and is an indicator of the tech industry's current state. Its strategy is indexed to the growth of the internet economy and the trajectories of the world's most innovative and forward-looking companies. Although Stripe has laid off 14% of its staff, or around 1,120 people, and some of its well-known customers, including Rivian, Affirm, and GitLab, have been affected by the current tech slump, Stripe's potential for growth makes it an attractive investment for existing and new investors.
However, investors have become warier due to the US Federal Reserve’s monetary tightening and increased scrutiny of startup indicators like profitability and cash burn. Stripe's co-founder and president, John Collison, expressed optimism about the future and said, "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."
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