Payments company Stripe has postponed its stock market debut, prompting Sequoia Capital, its lead investor, to look for creative ways to generate profits for its partners.
An email was sent by the venture investment firm to limited investors who contributed funds between 2009 and 2011. The email offered them the opportunity to purchase up to $861 million in Stripe and Axios shares. Although Sequoia declined to comment on the matter, it was mentioned in the email shared by Axios that the potential buyers would be newer Sequoia funds.
The magnitude of this action is highlighted for two reasons. On the one hand, it demonstrates the growing urgency of private investors to obtain liquidity in a scarce Initial Public Offering market. So far in 2024, only four IPOs of venture capital-backed technology companies have been registered: Reddit, Astera Labs, Ibotta and Rubrik, during the months of March and April.
Most notable, however, is the signal Sequoia sends by demonstrating the company's confidence not only in Stripe's future potential, but also in its ability to exit successfully and reward investors handsomely. In his statement to LPs, Sequoia expressed great optimism about Stripe's future and highlighted the company's strength through different economic cycles.
As of March 2021, Stripe had a valuation of $95 billion, positioning it as one of the most valuable private startups globally and appeared to be on track for a highly anticipated IPO. In January 2023, it was announced that Stripe had set a 12-month deadline to go public or consider a private transaction, such as a fundraising or takeover bid.
Of course, he decided to choose the latter option.
Over the past summer, Stripe earned a $50 billion valuation by raising $6,5 billion in Series I funding, which was a significant decline from its peak of $95 billion. In February, it was reported that Stripe had reached agreements with investors to offer liquidity to current and former employees through a tender offer valued at $65 billion. Although this marked a return to its peak rating, it was still considerably below its peak.
Despite having an astronomical sum of $65 billion, Stripe managed to retain its position as one of the most valued startups worldwide.
Since 2011, Sequoia has committed $517 million to Stripe. In its statement to LPs, the company said that Stripe's most recent valuation, according to the 409A filing, was $70 billion, and that Sequoia's total stake is estimated at $9.8 billion. Sequoia is said to distributed a total of 10 billion dollars to its investors in 2023.
Following Stripe's successful public acquisition and Sequoia's moves to repay earlier funds, it appears the fintech giant doesn't have an IPO on its mind anytime soon. It is interesting to note that Luciana Lixandru, partner at Sequoia, and Kevin Kelly, partner at Sequoia Heritage, are both on Stripe's board of directors, which gives them a deep understanding of the company's financial plans. Lixandru took over from Michael Moritz on the board after he left the venture capital firm in December.
The option of Stripe not going public on the stock market is certainly a possibility. Despite growing competition, Stripe, with 15 years of experience, has maintained outstanding growth. In its annual report in March, Stripe announced that it had surpassed the $1 trillion mark in total payment volume in 2023, after experiencing a 25% increase in its transactions. In addition, the company reported that in 2023 it managed to generate solid and positive cash flow, and it expects to maintain this trend in 2024. This implies that it will not feel pressured to raise funds, despite exploring options to allow its employees and investors venture capital sell shares.
