Deal Dive: A Stripe secondary deal worth paying attention to
Venture capitalists and founders are hoping — praying? — for exits to pick back up in 2024. A recent TechCrunch+ survey found that there is consensus among VCs that exits will start to rebound this year, but the when and the how are still a bit fuzzy.
The consensus, though, is that fintech Stripe will go public this year. The investors surveyed clearly aren’t the only ones who are excited about a potential Stripe exit in 2024, either. According to secondary data tracker Caplight, there has been an absolute flurry of buyers looking to get shares in the company in recent months.
While bids tell us one thing, deals tell us another, and a closed transaction this week tells us a lot about what could happen to Stripe in 2024. On Tuesday, literally the day after New Year’s Day, a secondary sale closed that valued Stripe shares at $21.06 apiece; that values the startup at $53.65 billion, according to Caplight data.
Stripe declined to comment.
There are a few reasons why this deal is worth paying attention to. For one, Stripe’s $53 billion value marks an increase from the company’s most recent primary round last March, when Stripe was valued at $50 billion.
Sure, you could say what’s a $3 billion valuation increase between friends, regarding a company that was worth nearly $100 billion at the beginning of 2022? I get it, but that increase is a bigger deal than its direct value.
For one, this secondary sale shows that investors think Stripe is growing its valuation again, which is a good sign for Stripe — obviously — but it’s also an anomaly compared to many other startups at that stage that aren’t AI companies or SpaceX, of course.
Back in December, I surveyed multiple secondary investors about the state of secondaries and where they were finding attractive opportunities. The thing they all agreed on is that the majority of high-flying startups from the peak of the market frenzy in 2021 still needed to lower their valuation to be attractive.
More than 40 investors share their top predictions for 2024
So a startup like Stripe — which did slash its valuation 52% in 2023 — getting a flurry of activity shows that investors likely think it is properly valued and ready to start growing again.
Investors looking to buy shares at this growing valuation is also a good sign of a potential IPO to come. Back in March, I spoke with a handful of secondaries investors — yeah, I’m pretty much always talking to these folks — on how we could use secondary deal information to track and predict when companies were going to go public. They told me that if any of these overvalued late-stage startups wanted to have a successful IPO, they’d need to slash their valuation and give investors the opportunity to drum up interest — and their position in the company — before going out. Well, that’s exactly what is happening with this Stripe deal.
By looking at who’s buying the shares on the secondary market, you can often tell whether the company will go public sooner rather than later. If it’s a large crossover investor or someone who largely invests in public stocks, like T. Rowe Price or Fidelity, that’s another positive signal that an IPO is just over the horizon. We don’t have that data for Stripe, but it’s worth keeping in mind.
While of course I can’t guarantee that Stripe will be one of the first IPOs in 2024, it shows that the company is ready. And if that does happen, I think Stripe could be the perfect public listing to revive the late-stage venture market and defrost the exit environment.
A good exit from Stripe would show that there is exit hope for the startups that got overvalued in 2021 but were built on solid fundamentals. Plus, I’d imagine that any late-stage investor who is able to hold their shares after Stripe goes public wouldn’t be looking at as big of a loss as it may seem now.
And even if Stripe doesn’t go public anytime soon, this deal shows us that investors are picking their winners from 2021 and that the market may see some growth again.
