Public markets haven’t been all that busy in 2022 as difficult market conditions have made going public less attractive for companies. But one of the most anticipated IPOs (or direct listings) yet to happen this year if market conditions improve would be Stripe, which allows businesses of all sizes to process credit and debit transactions. Based on its most recent fundraising round in early 2021, Stripe now has a stunning valuation of $95 billion. The company reportedly generated revenue of $7.4 billion in 2020.
Recently, Stripe’s founders (and brothers), Patrick and John Collison, provided the public with an update on the business. Here are three things we learned from her report.
Image source: Getty Images.
1. Gross payment volume has skyrocketed in 2021
Arguably the most newsworthy piece of information in the update is that Stripe processed $640 billion worth of payments in 2021, a 60% increase from 2020. According to TechCrunch, Stripe charges a 2.9% fee on the total value of a transaction and then another additional 30 cents per payment. Assuming that’s true, that means a gross payment volume of $640 billion equates to more than $18.5 billion in transaction revenue, excluding payment fees, which would be significantly higher than reported for 2020.
However, Stripe said much of the increase in volume in 2021 was due to “one-off behavioral adjustments due to the pandemic.” As a result, the company said “2022 will not reach the same level of growth.”
Also some competitors of Stripe, Paypal stocks and adyen, reported a total payment volume of US$1.25 trillion or US$560 billion. Paypal has a market cap of $130 billion while Adyen has a market cap of approximately $57 billion. While more than just payment volume goes into the valuation, it would actually suggest that Stripe is overvalued compared to both of these peers, at least based on gross payment volume. Stripe may wait until conditions improve before going public, as the market may not be ready to give it the same valuation it received a year ago.
2. Fast growing customers from all over the world
With the increasing volume of payments being processed, it only makes sense that Stripe is rapidly growing its customer base. The company said 1,400 new companies have joined Stripe every day for the past year. In 2021, more than 100 Stripe customers made more than $1 million in combined revenue with Stripe. With online spending accounting for just 12% of global spending, Stripe is excited about the future.
In addition, Stripe attracts companies from all over the world. The company said the majority of new customers in 2021 were from outside the United States. Stripe’s customers in Latin America grew more than five-fold, while Stripe’s customers in Asia Pacific more than doubled.
“We anticipate that a very large proportion of the major tech companies of the next decade will emerge outside of traditional US tech hubs,” the Collisons wrote in their letter.
3. Stripe invests heavily
Stripe has raised $2.2 billion from 39 investors, giving it plenty of cash to pursue investment opportunities to grow the company. It seems that Stripe has invested heavily in new products and capabilities, according to Patrick and John. In their letter, the two said new investments for start-up customers include payment links, Stripe Tax to help customers better manage sales and VAT taxes, enhancements to Stripe’s invoicing product, and revenue recognition automation.
For larger businesses, Stripe says it has invested in Stripe Terminal to consolidate online and offline payments. Stripe also said it has continued to scale its payment software integration product, Stripe Connect, to expand its usage globally and has begun to accept more international payment methods. Stripe now accepts 50 local payment methods and can accept payments in 72 countries.
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