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Stripe cuts internal valuation by 28%

wsj.com

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Re: Stripe cuts internal valuation by 28%

#11

Post by dasil003 »

sparker72678 wrote: post #9
TechBro8615 wrote: post #7

What is an internal valuation, and does Stripe actually lose anything from lowering it? My cynical experience suggests that companies usually have more to gain by lowering their valuation than they do by inflating it. Apologies if the article already described the possible negative impacts to Stripe caused by a decreased internal valuation. I’m unable to read it since it requires a subscription I cannot afford (due t…

Generally, "Internal valuation" is the valuation used by investors while the company is still private. One way it can affect Stripe is that it makes stock options less valuable to current employees, and can influence the weight those options have in persuading new hires.

It only makes the options less valuable if they are actually offering a liquidity event, otherwise it is actually advantageous to employees as any new option grants (both new hire and refreshers) are delineated in dollars, so a lower valuation means they get more of them.

I get that this might not align with the perspective of their employees, especially if they skew young and their expectations were shaped by tech stock price dynamics of the 2010s. A lot of folks haven't yet come to terms with the new normal. From an ISO/RSU earning employee's perspective, it's better for prices to correct quickly and completely so you can start getting new grants at more reasonable valuation with real upside.

Re: Stripe cuts internal valuation by 28%

#12

Post by pbreit »

sparker72678 wrote: post #9
TechBro8615 wrote: post #7

What is an internal valuation, and does Stripe actually lose anything from lowering it? My cynical experience suggests that companies usually have more to gain by lowering their valuation than they do by inflating it. Apologies if the article already described the possible negative impacts to Stripe caused by a decreased internal valuation. I’m unable to read it since it requires a subscription I cannot afford (due t…

Generally, "Internal valuation" is the valuation used by investors while the company is still private. One way it can affect Stripe is that it makes stock options less valuable to current employees, and can influence the weight those options have in persuading new hires.

There are typically two valuations of private companies. The "internal valuation" is usually the valuation of the common shares (ie, those that are granted to employees) whereas the "external valuation" is the value of the "preferred" shares that investors purchase. The external/preferred valuation is usually higher because the preferred shares have more attractive terms (such as that you get your money back first before other equity holders are paid out).

From the article: "A 409A valuation is an independent estimate of a startup’s fair market value often used to price stock options to employees."

Re: Stripe cuts internal valuation by 28%

#13

Post by itsryanirl »

rvz wrote: post #3

Oh dear. Not even Stripe is safe from the market downturn and they are cutting their valuation by 28% - from $98B to $74B. It's extremely early to write them off but perhaps they should have IPO'd in 2019. Since they didn't, they had to wait it out during 2020, 2021, etc. As long as they are profitable, then they will certainly survive this with ease. But overall, no-one is safe from this and we will see how the mark…

This. Companies that IPOd in 2019 were lucky. So many organizations had to and are going to have to wait out covid, the looming recession, etc...

The next few years will be interesting. I'm excited to see which domains are recession-proof. Something tells me enterprise software is going to be where the moola is made.

Re: Stripe cuts internal valuation by 28%

#14

Post by pbreit »

toomuchtodo wrote: post #5
asd88 wrote: post #4

$74B is still quite high for the current market

The current market so far . Interest rates will rise and CC transactions will migrate over time to less costly rails starting in the next 12-18 months (although Radar, Identity, and other value add products are likely to see continued use and rev growth). Imho, Stripe should've IPO'd at the top ~12+_ months ago. EDIT: @pbriet (HN throttling, can't reply directly to your comment) In the US, Zelle does $490B worth of v…

"CC transactions will migrate over time to less costly rails starting in the next 12-18 months"

People have been saying that for decades. And in fact the opposite is happening. Visa/MC raising rates. PayPal raising rates. Volume shifting to more expensive BNPL.

Re: Stripe cuts internal valuation by 28%

#16

Post by toomuchtodo »

pbreit wrote: post #14
toomuchtodo wrote: post #5

Earlier quoted context omitted.

The current market so far . Interest rates will rise and CC transactions will migrate over time to less costly rails starting in the next 12-18 months (although Radar, Identity, and other value add products are likely to see continued use and rev growth). Imho, Stripe should've IPO'd at the top ~12+_ months ago. EDIT: @pbriet (HN throttling, can't reply directly to your comment) In the US, Zelle does $490B worth of v…

"CC transactions will migrate over time to less costly rails starting in the next 12-18 months" People have been saying that for decades. And in fact the opposite is happening. Visa/MC raising rates. PayPal raising rates. Volume shifting to more expensive BNPL.

Timely thread: https://news.ycombinator.com/item?id=32100777 (UK lawmakers tell Visa and Mastercard to justify fee rises)

Re: Stripe cuts internal valuation by 28%

#17

Post by TechBro8615 »

pbreit wrote: post #12
sparker72678 wrote: post #9

Earlier quoted context omitted.

Generally, "Internal valuation" is the valuation used by investors while the company is still private. One way it can affect Stripe is that it makes stock options less valuable to current employees, and can influence the weight those options have in persuading new hires.

There are typically two valuations of private companies. The "internal valuation" is usually the valuation of the common shares (ie, those that are granted to employees) whereas the "external valuation" is the value of the "preferred" shares that investors purchase. The external/preferred valuation is usually higher because the preferred shares have more attractive terms (such as that you get your money back first be…

I know this is totally standard and everything, but imagine if we applied this to any other context:

- The “internal” assessment of the bridge’s strength, and the external assessment of the people who drive over it

- In politics, you have a “public position” and a “private position”

Makes you think!

Re: Stripe cuts internal valuation by 28%

#19

Post by bpodgursky »

paxys wrote: post #6

Should be cut by 50%+ to be in line with the rest of the tech market, and even more if you are valuing it as a FinTech company. SQ is down 75% since its November peak.

Stripe's growth is still pretty strong.

I don't know why you think every tech stock has to move lockstep. Some companies are far better positioned to weather a downturn than others.

Re: Stripe cuts internal valuation by 28%

#20

Post by atwood22 »

dasil003 wrote: post #11
sparker72678 wrote: post #9

Earlier quoted context omitted.

Generally, "Internal valuation" is the valuation used by investors while the company is still private. One way it can affect Stripe is that it makes stock options less valuable to current employees, and can influence the weight those options have in persuading new hires.

It only makes the options less valuable if they are actually offering a liquidity event, otherwise it is actually advantageous to employees as any new option grants (both new hire and refreshers) are delineated in dollars, so a lower valuation means they get more of them. I get that this might not align with the perspective of their employees, especially if they skew young and their expectations were shaped by tech s…

It really depends. A lower valuation also means raising money will be at lower valuations, which means investors get more of the company, which means more share dilution.
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