In a move that surprised many, payment processor Stripe has raised $6.5 billion in a new funding round led by investors such as Andreessen Horowitz, Founders Fund, Goldman Sachs, and Temasek.
Despite this, the company’s valuation of $50 billion represents a significant decline from its peak valuation of $95 billion in 2021. In a statement, Stripe clarified that the new capital was unnecessary to operate its business. Instead, the money will provide liquidity to current and former employees and settle tax obligations associated with equity awards.
Stripe’s decision to raise funds in this way is interesting. The company has remained privately owned for over a decade, despite widespread speculation about a potential IPO.
CNBC reported earlier this year that the company was set to decide to go public within the next 12 months, but as yet, no firm plans have been announced. In the meantime, Stripe has been taking steps to maintain its competitive edge, with its payment processing software used by e-commerce giants such as Amazon, Google, and Shopify.
Goldman Sachs and J.P. Morgan played essential roles in the latest funding round. The former serves as the sole placement agent, and the latter as Stripe’s financial advisor.
Despite the reduction in valuation, the Series I round will be non-dilutive. The company will use the new funds to offset the issuance of new shares. While this approach is unusual, Stripe’s co-founder, John Collison, has previously stated that private ownership is preferable to going public.
Stripe’s recent valuation cuts align with broader trends in the tech industry, with the Nasdaq experiencing its worst year since 2008 in 2020.
In July of that year, Stripe cut its internal valuation by 28%, from $95 billion to $74 billion, before lowering it again to $63 billion in January 2021.
Despite this, the company has continued to innovate and expand, with its recent funding round likely to boost its growth ambitions.