What's going on?
Stripe, the six-year old payments startup, has raised $150 million of investment that values the company at more than $9 billion – which extends its lead as America’s most valuable fintech startup (according to The Wall Street Journal, which first broke the story about Stripe’s investment).
What does this mean?
Stripe handles online payments for many startups in the US and, increasingly, big corporations (as well as both presidential campaigns). The $150 million are coming from some of its existing investors as well as the venture capital arm of Alphabet (Google’s parent company). The investment will reportedly be used to build new products, expand into new markets and acquire other companies. Stripe has branched out from simply offering a payments solution to also offering services like fraud prevention and software that helps incorporate companies. These other services are expected to be more profitable (skimming a fee for processing a transaction is very low margin business). In short, Stripe is aiming to develop other ways to simplify running a digital business.
Why should I care?
The bigger picture: A bright spot in an otherwise more challenging market for fintech.
Bloomberg’s US Startups Barometer, which measures things like capital raised, deal count and number of exits, has fallen 8.9 percent in the past year. Many public fintech companies (i.e. ones whose stocks trade on a stock exchange) have had a tough year, especially those focused on lending (e.g. Lending Club). Square, a payments processing firm that is often compared to Stripe, has seen its stock fall from the price at which it became a public company last year. Stripe’s success at raising money shows there is still demand to invest in promising fintech startups.
For markets: Stripe is geared towards the growth of online retailing.
Stripe’s customers are mainly online merchants and thus it’s highly geared to the growth of online retailing – which is growing much faster than offline retail. Growing along with online retailing should help Stripe maintain its growth trajectory.