VCs weigh in on what a possible Stripe public listing—or a down round—means for Silicon Valley

The payments titan hired bankers (Goldman Sachs and JPMorgan, to be specific) to explore either taking the company public or doing a deal that would allow employees to sell stock within the next 12 months, co-founders Patrick and John Collison told employees on Thursday, The Information reported. There have been reports of Stripe inching toward going public in recent years, but the current urgency appears to be due to resolving a stock awards issue for employees, where longtime employees’ restricted stock units (RSUs) are set to expire soon—hence the push for some sort of liquidity event. But per the report, it’s more likely that Stripe will raise capital privately than go public. Stripe declined to comment to me. 

The RSU expiration element here is pretty wonky, but the long and short of it is that Stripe’s latest plans seem motivated by the need to give employees liquidity versus needing to raise more cash. The company reportedly doesn’t need to raise additional capital, although revenue growth dropped sharply in 2022 and Stripe was unprofitable, per The Information. Meanwhile, the company laid off 14% of its staff in November. 

No matter what path they choose, Stripe’s potential moves are a big deal for Silicon Valley. I rang up a few VCs to walk through its implications.

One person familiar with the matter that I spoke to confirmed that if Stripe did a private transaction, it would most likely be a private market capital raise from VCs and a tender offer (which would allow employees to sell shares) for liquidity. (The raise would be so that the startup could remain private, the person said.) Sarah Hinkfuss, a partner at Bain Capital Ventures focused on growth-stage startups, says that what’s playing out with Stripe is “what every company is thinking about and facing. It’s a very familiar challenge:…’As I’ve cut [my] workforce, as the economy is more difficult for families, how do I keep morale high and help people see that we’re building incredible value and they’re gonna benefit from that in their equity?’”

She says what she likes about the Stripe news is that “This is a huge part of people’s wealth, and so companies have to take care of them and think about that side of it.”

If Stripe opts for a tender offer and a raise, the big question is, would the company get hit with a down round? Or, rather, how badly? There are already a lot of indicators: The company has reportedly internally slashed its valuation at least thrice since June, most recently earlier this month, to a roughly $63 billion valuation, per The Information (via a 409a valuation). The 13-year-old firm last raised at an eye-watering $95 billion valuation in early 2021 from big backers including Sequoia Capital and Fidelity Investments. What’s more, Stripe has reportedly recently held talks to raise at least $2 billion at a valuation of between $55 billion to $60 billion, the Wall Street Journal reported. Meanwhile, as my colleague Jessica Mathews reported recently: 

In mid-November of 2021, investors were scooping up shares of Stripe on the secondary market for as much as $83 per share, according to [secondary brokerage] Rainmaker data. At the end of last year, the secondary brokerage was placing orders for between $29-35 per share. 

Quite the haircut. But VCs I talked to yesterday agree that given how beaten up public tech stocks are, and how chilly the fundraising environment is right now, a down round wouldn’t be anything surprising—even for what’s perceived as a blue chip startup like Stripe. In terms of a down round, Brian Ascher, a partner at VC firm Venrock, notes whether it’s a secondary or primary sale (meaning the company selling new shares), “it’s still liquidity for employees, and if there is [a] primary [sale], it’s on clean terms. I think that’s actually healthy…and a good lesson” for companies that the sky-high valuations from 2021 “weren’t real”—at least until they can grow into them, he says. 

The other (albeit seemingly less likely) route is a very hotly anticipated, blockbuster public debut. Stripe is exploring going public via a direct listing, the person familiar confirmed to me—where companies list their shares, historically without raising extra capital, à la Coinbase and Slack in recent years. This is where it gets interesting: Stripe is highly regarded in tech circles and has raised over $2 billion from investors, per PitchBook data. It’s a widely held belief in the VC community that it could be the company—or at least one of the companies—to reopen the IPO window, which has pretty much been slammed shut for a while now. If (and it feels like a big “if”) Stripe does choose to go public in the next year, and, importantly, if it’s a successful listing, we may finally see more startups pursuing an IPO.

“The companies that are going to break the IPO drought are going to be those of exceptional quality, and I think Stripe would be on the list,” Hinkfuss says, echoing other VCs’ sentiments. Venrock’s Ascher adds that a successful Stripe debut would “definitely [be] a positive sign, but not necessarily a sign that it’s all clear for everybody.” Others like David Pakman, a longtime vet of the venture industry and currently a managing partner at crypto-focused firm CoinFund, say he was surprised: “I didn’t think there’d be anyone talking about going public right now, no matter how great they are.” But ultimately he thinks Stripe could be “one of the first to help try to test the waters.” Meanwhile, I wager other startups, notably private competitors like Checkout.com, are probably closely watching what happens with Stripe as well. 

But Hinkfuss mentioned one thing I’ve been thinking about: “It’s newsworthy because it’s Stripe,” she notes, but “I think these conversations are happening already” at other pre-IPO companies.  

Whatever Stripe ends up doing, one thing’s for sure: VCs and the Valley—and Term Sheet—are paying close attention.

Have a great weekend,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Pearl Health, a New York-based patient care software platform for physicians, raised $55 million in Series B funding. Andreessen Horowitz’s Growth Fund and Viking Global Investors co-led the round and were joined by AlleyCorp, SV Angel’s Growth Fund, and others.

- Tado, a Munich-based home energy management startup, raised €43 million ($46.82 million) in funding. Trill Impact Ventures led the round and was joined by Kiko Ventures, Bayern Kapital, and Zürcher Kantonalbank.

- Crowdbotics, a Berkeley, Calif.-based software development platform, raised $40 million in Series B funding. NEA led the round and was joined by Homebrew, JSV, Harrison Metal, and Cooley.

- iVexSol, a Lexington, Mass.-based lentiviral vector contract development and manufacturing company, raised $23.8 million in Series A-3 funding. Bristol Myers Squibb, Charles River Laboratories, Asahi Kasei Medical, BioLife Solutions, and Casdin Capital invested in the round. 

- iSeller, a Jakarta-based point-of-sale platform for online and offline merchants, raised $12 million in Series B funding. Intudo Ventures led the round and was joined by KVision, Mandiri Capital Indonesia, and Openspace Ventures.

- Addie’s, a Norwood, Mass.-based drive-up grocery store, raised $10.1 million in seed funding led by the Disruptive Innovation Fund. 

- Elaborate, a New York-based lab result delivery platform for patients, raised $10 million in seed funding. Tusk Venture Partners led the round and was joined by Founder Collective, Company Ventures, Bling Ventures, Arkitekt Ventures, and other angels. 

- Foro, a Charlotte-based commercial lending company, raised $8 million in Series A funding. TTV Capital led the round and was joined by Fin Capital, Correlation Ventures, AME Cloud Ventures, US Bank’s investment arm, and others.

- Senken, a Berlin- and Cape Town-based climate finance trading platform, raised $7.5 million in funding. Obvious Ventures led the round and was joined by Offline Ventures, Inflection, Kraken Ventures, and Climate Capital. 

- StoryCo, a Los Angeles-based storytelling media platform, raised $6 million in seed funding. Collab + Currency and Patron co-led the round and were joined by Floodgate Ventures, Blockchange Ventures, Sfermion, Flamingo DAO, and other angels.

- Refined Laser Systems, Münster, Germany-based laser systems company for quantum technology, raised €2.7 million ($2.93 million) in seed funding. High-Tech Gründerfonds and APEX Ventures co-led the round and were joined by NRW.Bank, Onsight Ventures, and Papst Venture Capital.

PRIVATE EQUITY

- Shrieve, backed by Gemspring Capital, acquired Chem One, a Houston-based dry chemicals company. Financial terms were not disclosed. 

EXITS

- Encora, backed by Advent International and Warburg Pincus, acquired Excellarate, a Wayne, Pa.-based technology services and solutions provider, from Frontenac. Financial terms were not disclosed. 

OTHER

- CareAcademy acquired the assets of NextStep, a Seattle-based digital health care training provider for certified nursing assistants. Financial terms were not disclosed. 

SPAC

- Longevity Biomedical, a Bothell, Wash.-based biopharmaceutical company, agreed to go public via a merger with Denali Capital Acquisition Corp., a SPAC. The deal is valued at $236.2 million.  

FUNDS + FUNDS OF FUNDS

- New Enterprise Associates, a Menlo Park, Calif.-based venture capital firm, raised $6.2 billion across two funds focused on enterprise and consumer technology, anddigital health and life sciences companies.

- Vision Ridge Partners, a Boulder, Colo.- and New York-based investment firm, raised $700 million for a fund focused on assets across energy, transportation, and agriculture industries. 

PEOPLE

- Linse Capital, a San Juan, Puerto Rico-based growth equity firm, promoted Dario Constantine to principal.