Stripe, the internet payment processing company, reported in March 2021 that it had received $600 million at a valuation of $95 billion. When the figures were released months after the sale was revealed, they caused quite a stir. The Stripe that was raised in early 2021 is noteworthy. In the following quarters, some private companies that obtained big sums of cash last year have battled to maintain their valuations – or even their businesses. This raises an intriguing issue regarding Stripe: did it raise at a price it couldn’t sustain, as many other businesses and unicorns did last year?
I wasn’t sure until lately, although thinking about it from time to time. Stripe, thankfully, sent a mainly data-free 2021 update letter this month, with just enough information for us to get our hands dirty with. We can generate valuation figures for Stripe using some creative arithmetic and, hopefully, reasonable extrapolation, which should help us better appreciate how successfully the payments behemoth masquerading as a private firm priced its recent equity deal. All of our calculations will be obsolete the minute Stripe files an S-1, but given the lack of recent rumors to that effect, the business is either conducting a quiet procedure or isn’t that near.
More background for our inquiry about Stripe’s worth may be found in the following article from a few weeks ago: Fidelity decreased its Stripe stock’s internal value by 9% from its 2021 level. Was that a little too much, a little too soon? This morning, let’s have some fun with numbers. We’ll start with the company’s recently revealed processing volume and work our way up from there. Into the void!
Is Stripe’s stock overpriced? Stripe’s 2021 update, which you can read in full here, includes the following language about the company’s past and future growth: In 2021, Stripe-enabled businesses processed more than $640 billion in payments, up 60% from the previous year. (Because most of this was due to one-time behavioral changes brought on by the epidemic, 2022 will not meet the same degree of increase.)
Fast, a firm that offered online checkout services, announced its closure this afternoon. The company’s survival has been in doubt for days, as reports revealed that revenue growth in 2021 would be moderate, capital burn would be considerable, and funding alternatives would be restricted. The company’s conclusion was originally published by The Information. The firm claimed in a statement that “we have made the tough choice to close our doors” after “making enormous strides on our objective of making buying and selling seamless for everyone.”
The firm, created by Domm Holland and Allison Barr Allen, went on to call itself a “trailblazer,” stating that despite it failed, it managed to “forever” revolutionize the world of internet commerce. It’s unclear how much credit the short-lived firm deserves for its efforts in the one-click checkout industry, but at least fast is going out the way it came in: giving itself more credit than its financial outcomes deserved. Despite obtaining a $102 million Series B lead by Stripe, Fast only made six figures in sales in 2021. The company’s monthly burn rate was believed to be as high as $10 million, a large multiple of revenue, much alone gross profit.
