There hasn't been too much activity in the public markets in 2022, as difficult market conditions have made going public less appealing for companies. But one of the most hotly anticipated IPOs (or direct listings) that may still happen this year if market conditions improve would be Stripe, which enables businesses of all sizes to process credit and debit transactions. Based on its last fundraising round in early 2021, Stripe now has a jaw-dropping valuation of $95 billion. The company reportedly generated $7.4 billion in revenue in 2020.
Recently, Stripe founders (and brothers) Patrick and John Collison provided the public with an update on the business. Here are three things we learned from their report.
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1. Gross payment volume surged in 2021
Arguably the most newsworthy piece of information in the update is that Stripe processed $640 billion of payments in 2021, an increase of 60% from 2020. According to TechCrunch, Stripe charges a 2.9% fee on the total value of a transaction and then another additional 30 cents per payment. Assuming that's correct, that means $640 billion of gross payment volume equates to more than $18.5 billion of transaction revenue, not including payment fees, which would be significantly higher than what was reported for 2020.
Stripe, however, said that a lot of the uptick in volume in 2021 can be attributed to "one-time behavioral adjustments caused by the pandemic." As a result, the company said "2022 won't match the same level of growth."
Also, some of Stripe's competitors, Paypal Holdings and Adyen, reported total payment volumes of $1.25 trillion and $560 billion, respectively. Paypal has a $130 billion market cap, while Adyen has about a $57 billion market cap. Although there is more that goes into valuation than just payment volume, that would actually suggest Stripe is overvalued compared to these two competitors, at least based on gross payment volume. Stripe may hold off on going public until conditions improve, because the market may not be willing to give it the same valuation it received a year ago.
2. Rapidly growing customers from all over
With surging payments volume being processed, it only makes sense that Stripe is rapidly growing its customers. The company said 1,400 new companies joined Stripe each day last year. In 2021, more than 100 of Stripe's clients surpassed $1 million in total sales on Stripe. Considering that online spending only made up 12% of global spending, Stripe is excited about the future.
Furthermore, Stripe is attracting companies from all over the globe. The company said the majority of new customers in 2021 didn't come from the U.S. Stripe's customers hailing from Latin America grew more than fivefold, while Stripe customers in the Asia-Pacific region more than doubled.
"We expect that a very large fraction of the important tech companies of the next decade will be built outside of the traditional US tech hubs," the Collisons wrote in their letter.
3. Stripe is investing heavily
Stripe has raised $2.2 billion from 39 investors, so it has had plenty of cash to pursue investment opportunities to grow the business. It appears that Stripe has been investing a good amount into new products and capabilities, according to Patrick and John. In their letter, the two said new investments for start-up clients include payment links, Stripe Tax to help customers better manage sales and value-added taxes, improvements to Stripe's invoicing product, and the automation of revenue recognition.
For larger enterprises, Stripe said it has invested in Stripe Terminal to consolidate online and offline payments. Stripe also said it has further scaled its payment software integration product, Stripe Connect, to expand its use globally and started accepting more international payment methods. Stripe now accepts 50 local payment methods and can make payments in 72 countries.
