The most valuable U.S. financial technology startup is extending
its lead.
Stripe Inc., whose software is used by businesses to accept and
track digital payments, will be valued at $9.2 billion in a new
funding round that is being completed, the company said.
That valuation, which includes roughly $150 million in new cash
being raised, nearly doubles the privately held company's $5
billion price tag in a July 2015 round. Stripe was already valued
higher than other U.S. "fintech" startups such as Social Finance
Inc. and Betterment Inc.
The leap comes as other fintech firms and some Silicon Valley
tech startups struggle to maintain their valuations. Payments
company Square Inc. has seen its share price stagnate since going
public in 2015.
Stripe's investors think the company can capitalize on the fast
growth of online payments as consumers transfer more of their
offline spending to internet retailers and as Stripe continues to
expand internationally.
Stripe is approaching Square's payment volume but hasn't
eclipsed it yet, according to a person familiar with the matter.
However, Stripe is growing much faster than Square's expected
growth rate of 40% this year, this person said. Square said it
processed $13.2 billion of payments in the third quarter.
The two companies generate revenue by taking a small percentage
of every transaction that merchants process with their software,
though much of Square's volume comes from physical stores and
merchants, while Stripe's volume comes from online transactions.
Stripe says half of all U.S. internet users have made a payment
through a merchant using Stripe—up from a quarter last year, but it
declines to comment on its transaction volume.
Stripe's new round is being co-led by CapitalG, an investing arm
of Alphabet Inc., and General Catalyst Partners, one of Stripe's
earliest investors. Other existing investors, including Sequoia
Capital, are also participating.
Sequoia Capital partner Michael Moritz said it was a bullish
sign that Stripe is able to sell new equity at a significantly
higher valuation in a "buyer's market."
Stripe said it separately received a credit line from banks
including J.P. Morgan Chase & Co., Goldman Sachs Group Inc.,
Morgan Stanley and Barclays PLC.
Stripe has now raised some $460 million. On Monday, the company
filed paperwork in Delaware authorizing the sale of new shares,
according to private-share marketplace Equidate.
Chief Financial Officer Will Gaybrick said Stripe raised the
money to acquire companies and invest further in international
expansion. Stripe launched in Japan, France, Singapore and Spain
this year, and has acquired three smaller firms.
Stripe was founded in 2010 by Patrick and John Collison, two
20-something Irish brothers who left before graduating from their
respective colleges, Massachusetts Institute of Technology and
Harvard University. Stripe quickly developed an enthusiastic
following among Silicon Valley startup software developers, who say
Stripe's tools make it easy to start an online account, add a small
bit of code, and accept credit and debit cards on the web or inside
a mobile app—bypassing lengthy agreements with banks and
traditional payments providers.
Stripe's valuation is partly built on the belief that more
commerce will move from shop registers to websites and mobile apps,
even when people are in stores, because of the advent of mobile
wallets such as Apple Inc.'s Apple Pay or J.P. Morgan's Chase Pay
that can be tapped or scanned at the checkout counter.
Only about 9% of retail commerce world-wide in 2016 is expected
to be conducted online, according to research firm eMarketer, and
online commerce is expected to grow 23% in 2017, versus just 6% for
all retail commerce.
Stripe has escaped the gloom surrounding other fintech startups
this year. Companies offering digital versions of traditional
banking services, like loans or investments or checking accounts,
have struggled this year. Shares of public companies such as
LendingClub Corp. are down sharply, and venture fundraising has
slowed. Banks have proved nimble competitors in some digital
products, and have many natural advantages such as customer trust
and special regulatory powers.
Meanwhile, Stripe often competes with payments processors that
were built around card-swiping terminals based in stores—though
some banks, such as J.P. Morgan, are shifting to focus more on
mobile commerce. Among Stripe's closest rivals are Braintree,
acquired by PayPal Holdings Inc. in 2013; Dutch startup Adyen NV,
valued at $2.3 billion last year; and Redwood, Calif.-based WePay
Inc. Visa Inc. and American Express Co. are investors in
Stripe.
Stripe has added traditional merchants, such as Target Corp., to
its typically young online client base that includes car-hailing
company Lyft Inc. and eyeglasses retailer Warby Parker, Mr.
Gaybrick said. Stripe this year has also launched Radar, a service
using Stripe's transaction data to detect fraudulent payments, as
well as Atlas, which enables foreign companies to incorporate in
the U.S. and use American payment infrastructure.
Stripe Chief Executive Patrick Collison said "there aren't a lot
of antecedents" for his "hybrid" company, which also provides
software, and that is "why Stripe has been persistently
misunderstood, and to some degree undervalued for so long."
Write to Rolfe Winkler at rolfe.winkler@wsj.com and Telis Demos
at telis.demos@wsj.com
(END) Dow Jones Newswires
November 25, 2016 07:55 ET (12:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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