During a time when tech-based companies are beginning to dominate the business landscape, another company is continuing to carve out its own path in sensational form. According a recent report, Stripe, a company that facilitates the capacity for website and mobile app owners to incorporate payment services into their functional processes — through a basic API and several lines of code — has entered into another round of fundraising that has proven to be highly successful.
The report reveals that the company has raised an additional $150 million at a pre-money valuation of $9 billion and a post-money valuation of $9.2 billion. The amount of money that the company has been able to raise is significant in a number of ways. Most importantly, there have been some recent concerns that some of the new startups are being overinflated in actual value — creating a revenue bubble that will eventually burst or deflate.
Having the capacity to raise this type of money in a second round fundraising effort is indicative of an external perception that the company has the capacity to establish itself as a long-term option within its niche, as well as expand its reach and scope over time. This latest valuation is significant in comparison to the company’s valuation during its last fundraising round during the summer of 2015. During that round, the company was valued at $5 billion. The company has been able to leverage its perceived growth, as revealed in the valuation, to generate the capital necessary to expand its reach by scaling up its services.
Stripe is an Irish-based technology firm that is currently operating in more than 25 countries across the globe. The company allows business owners, organizations and individuals to create the capacity to accept payments on their website and mobile applications. Stripe has developed the capacity to provide its clients with an entire suite of services that resemble virtual banking, including technical support, fraud protection and the basic banking infrastructure that is necessary to safely facilitate online payments.
Stripe is rapidly emerging as a viable option for online payment processing giant, PayPal. As more and more companies, organizations and individuals become disenfranchised with some of the policies and practices of PayPal, it has open the door for other providers like Stripe to find a secure position within the market. As PayPal continues to struggle with merchants as shoppers, the options for Stripe continue to increase.
The company was co-founded by Irish entrepreneurs, Patrick and John Collison in 2010. The company began as a startup named Dev-payments. Due to the fact that the initial name of the company result in a high number of misspellings and confusion, the company was renamed Stripe in the same year. The initial seed funding for the company was providing through Y Combinator — a startup accelerator.
In addition to the activity on associated with the funding round, the company is also receiving credit facility of $250 million. This line of credit will be secured by J.P. Morgan Chase & Co, Morgan Stanley, Goldman Sachs Group, Inc. and Barclays PLC. It is important to understand that this is a credit line, and not an actual loan. It simply creates the access to emergency funds if the company were to ever need it. There is no obligation for the Stripe to ever use the $250, but having access to that type of funding during a time when interest rates are low, but debt is high is significant in establishing the stability that is paramount for the longevity of the company.
The timing of this funding round was not an accident, nor was it a coincident. The fundraising round is being carried at the start of the holiday season, meaning that companies like Stripe will get a percentage cut of all of the online transactions they facilitate. This is the time of the year that companies generate more revenue than at any other time. The success of the funding round places Stripe in a position to be extremely aggressive in the manner in which they market their product and the incentives they offer users.
While there may be some who might feel that it is somewhat strange to announce this during a news-lite holiday period; however, it actually makes perfect sense when consider the long-term aspirations of the company. For a company that may eventually go public or seek a merger with a larger company, this is a great way to send a message that they are here to stay. It is a great momentum builder, and brand booster.
This latest round was spearheaded by General Catalyst, which has worked with VC in the past, and a new investor, CapitalG, which is the new name for Google’s venture capital subsidiary. The round also involved other investor like Sequoia Capital and a number of unnamed investors. The latest round brings the total amount raised by the Collison brothers for Stripe to $460 million.
While Stripe has built its business primarily around its capacity to facilitate online payments, it has been working diligently to fulfill its ambition to function in a number of other capacities within the scope of its market. One thing that the company has been working on is serving businesses from outside the United States — with services that include methods for expediting payouts, fraud prevention. The introduction of these expanded scopes of operation will help the company improve its profit margins and overall stability within the market.
According to Stripe, this latest round of funding will be used to build out these concepts, and they are looking to develop and acquire more tools and businesses to help facilitate the ambitions. Another focus of the company will be an increase in the rate of hiring.
While there is no specific indication of what exactly will be launched next by the company, John Collison has hinted that there could be a roll out of a fraud prevention tool to subsidize the existing Radar program — a tool that will increase the company’s ability to provide both, buyers and sellers with protection on the e-commerce stage.