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- On Thursday, online payments startup Stripe announced $600 million in new funding that values the company at $36 billion — up slightly from its $35 billion valuation in September.
- Cofounder and president John Collison tells Business Insider that Stripe chose to raise funding now because it’s in a position of strength: Even before the coronavirus crisis led to a boom in online shopping and in-app purchasing, Stripe had signed big new customers like Mattel and NBC.
- Its business is now accelerating as new customers like Zoom turn to Stripe’s technology to accept payments from a crush of new customers, and Collison says the company wants the funds to ensure that it can continue hiring and developing its product to keep pace.
- Collison also says that Stripe is open to acquiring smaller startups given the market downturn, but that the company is trying to be thoughtful and only cut deals where it makes sense for its business.
- In the bigger picture, Stripe has been positioning itself to go after larger enterprise customers, and Thursday’s announcement shows that it’s been making progress in that regard.
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On Thursday, payments startup Stripe announced that it had raised $600 million in new capital at a sky-high $36 billion valuation from Andreessen Horowitz, GV (formerly Google Ventures), Sequoia, General Catalyst, and other investors.
The funding was technically an extension of the $250 million Series G round it closed in September, and increased its valuation only slightly from $35 billion. The company indicated at the time that it would not seek an IPO any time soon and there’s no sign that anything’s changed since.
The raise marks one of the few big-money venture deals closed amid the coronavirus crisis, as investors hunker down and prepare for what could be a recession of indeterminate length. John Collison, cofounder and president of Stripe, says it’s that very same uncertainty that drove it to seek more funding.
“We think the dislocation could be here for a while,” Collison tells Business Insider. “It’s not clear what the rest of 2020 looks like. It’s not clear what the rest of 2021 looks like.”
At the same time, Collison says, the funding comes as Stripe enjoys a position of strength: The company said on Thursday that it has over $2 billion on its balance sheet, and that it had already signed big customers like Mattel, NBC, and food-delivery app Caviar in the first few months of the year. As shelter-in-place orders and remote work have led to a surge in online shopping and in-app buying, Stripe has seen a “big spike in signups,” from new customers turning to its technology to help accept payments from their own apps and websites, Collison says. For example, mega-popular video chat tool Zoom just signed on.
While Collison acknowledges that the “natural response” of many companies is to “hold back” and cut costs due to the tumult in the global economy, the right move for Stripe right now is to speed up its own growth, not slow it down.
“We want Stripe to be able to keep investing,” Collison said, even amid what he described as the “weird COVID times.”
“M&A favors the prepared mind and the prepared balance sheet”
Specifically, Stripe plans to invest in people, product, and infrastructure.
As businesses in all industries announce layoffs, Stripe wants to be able to continue hiring, especially as it expands its geographic reach into new countries like Romania and Hungary. Its product and infrastructure are more important than ever now, too, as customers rely on Stripe to keep their businesses running online.
Acquisitions are also on Collison’s mind, too.
There’s been plenty of chatter that the crisis and subsequent market uncertainty will drive new waves of consolidation: A cofounder of videoconferencing company BlueJeans Network specifically said that the pandemic accelerated its acquisition talks with Verizon, culminating in a deal valued at around $500 million, also announced on Thursday.
Collison says that Stripe sees this kind of M&A as “the sensible thing to do,” and that the company is always looking for good opportunities to buy startups.
At the same time, though, Collison says that Stripe won’t swoop in on a company just because the crisis makes it a cheap target: It plans to spend its money wisely on startups that make “any useful sense” to the business. Ultimately, though, the company is well-positioned to cut deals, he says.
“M&A favors the prepared mind and the prepared balance sheet,” Collison says.
Stripe is going after new kinds of customers
In terms of its business strategy, Stripe has previously said that a major focus going forward is chasing after larger enterprise customers. It already counts Airbnb, Amazon, and Target as clients; the addition of the new customers announced on Thursday shows some progress in that regard.
Collison highlights some of the new challenges and opportunities afforded by the pandemic, saying that Stripe has been “trying to adapt” by taking steps like making it easier for a business to get started with the product and by racing to ensure that its infrastructure can keep up with the skyrocketing demand that some of its customers are seeing, like grocery delivery app Instacart. Collison says that Stripe is now “core internet infrastructure” for its users, which rely on it to power their respective businesses.
He also says that the pandemic has been an opportunity for Stripe to bring on a whole new type of customer: telemedicine services which let users consult medical professionals via their smartphone, like Solv.
Collison says that while Stripe didn’t support those kinds of companies before, he’s happy that it can help them now in this moment of crisis. He also sees the growth of those kinds of companies as a sign of things to come in the field.
“It really feels like a new category of market and product,” Collison said.