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.
stripe doesn't do stock options. they do yearly cash-value RSU.
I don't know if I agree. Adyen is worth $45 billion euros (so $45 billion :) .) From their last annual reports, Adyen '21 GPV: $561B +70% YoY; Stripe '21 GPV: $640B +60% YoY but Stripe has ~2x take rate on Adyen because they are more PLG versus Adyen has many more enterprise customers. So $74b is probably about right or maybe even low?
> So $74b is probably about right or maybe even low? Of course you are assuming that Adyen is somewhat fairly valued :) . That's the problem with comparative valuations IMO. If company A valuation = company B valuation and company A itself is overvalued, it doesn't mean they are both fairly valued,no?
If the public market is suggesting that, not a bad benchmark to have a quantitative figure.
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…
Ok, no one has given a good answer to this yet. The “internal valuation” is a 409a valuation and the primary use case is for the tax basis for options granted within 12 months of the grant date. Stripe gives double trigger RSUs so this won’t directly impact the large majority of employees getting RSUs, but they may choose to offer more equity for refreshers or new hire grants, this has little/nothing to do directly with 409a. 409a also is not used by investors to value shares, it has nothing to do with “mark to market” pricing of funds who own stripe equity communicating the value of their investment to LPs in the fund. There are 3 ways to calculate a 409a valuation, specified directly by the IRS, they’re all a very naive way to value companies, and once again the whole point is to have a tax basis for options grants. 409a vals are nearly always below the latest private financing valuation and it is generally in the employees interest to keep the 409a as low as possible for as long as possible to keep the tax basis as low for exercising options. The strike price in options directly comes from the 409a valuation, the basic idea is that (strike price) * (total number of outstanding shares) = 409a valuation. If you do this, the options the company gives you have no value according to the IRS so they are not counted as income. Thanks for coming to my TED talk.
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.
Strong agree. It feels like a different lifetime to think back to 2018 and 2019; back then, everyone in town was hyper-fixated on a whole raft of companies that kept teasing their IPOs.
I did some very quick and lazy Googling [1][2], and even I was surprised by just how long the full list of familiar names is, looking at 2018 and 2019 IPOs. Just to drop a few incredibly-familiar ones:
I personally know a bunch of people that spent months (or years) of their lives in suspense waiting for one of these. (I'm one of them, for what it's worth.) It's wild to think how different so many lives would have been if even one of these companies had decided to postpone their IPO for a year or two.
Because they can't be sold right now. And the future date at which they could be sold is undetermined and doesn't appear to be any time soon.
Please feel free to send any worthless Stripe RSUs my way. I've been looking for a way to pay someone for some of them for the better part of a decade at this point.
Stripe shares do trade on secondary markets. If you sniff around on the big ones, I bet you could pick some up.
Shouldn't going public on an unrealistic market cap would cause more issues than benefits? Sure, a healthy exit is ok but later pressure to recover the market cap in the short term can cause heavy structural damages inside any org.
I think that's a more complicated explanation than necessary. If their private valuation is higher than their public valuation it means they can raise money more cheaply while private.
To the benefit of the company and the people that control Stripe, not necessarily the hard working ICs that would enjoy liquidity.
The opportunity cost of this restriction on their lives is huge.
Had they gone public two years ago, employees would have benefitted from a market of a lifetime, with equity in one of the best tickets in town.
A lot of life changing early retirements and "Fat FIRE".
"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.
FedNow hasn't been available for decades. It's a real threat to the entire cc ecosystem.
UPI in India has effectively killed credit cards as a payment method. Any similar system will likely do the same in the US.
I assure you, you will have no trouble selling Stripe stock at what its worth. There is a big appetite for Stripe shares in the secondary markets even if the company never goes public.
Stripe has "double trigger" RSUs, meaning you don't actually own them until after IPO + lockup period. There are tax advantages to doing it this way, but it means that a senior hire "getting" $200k/year can't sell on the secondary markets, and may be getting shares that they will never be able to sell for their supposed value.
You also get a really fun tax bill when you have been at the company for 4 years and they IPO.
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.
Companies that raised in 2019 or early 2020 and didn’t raise another round after that are in for a really tough time. Their coffers are running dry by now and its getting really, really hard to raise more now.
I suspect we’ll see the global list of unicorns shrink quite a bit by 2024
Many companies actually prohibit employees from selling shares to third party investors (including investors on marketplaces like EquityZen) without board approval.
This is a really fair and important point - I appreciate you bringing it up. I've seen a couple of Stripe secondaries before so I assume that some set of employees are able to transact on the secondary market. However, important disclaimer that not all companies have the same terms - and the terms can change depending on when you were hired. Startup equity isn't absurdly complicated, but it very much is situation-spe…
They could be investor secondary sales which won't have the same restrictions.