Stripe's new investment talk is an effort to rectify past mistakes
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When news recently leaked that Stripe is in talks to raise new funding, most of the chatter was about a $60 billion valuation that's well below what the payments giant previously fetched.
- And that made sense, given how much weight we typically attach to nosebleed prices.
Between the lines: What also deserves attention, however, is that Stripe appears to be handling the tech deflation with humility, empathy and prudence, unlike some of its tech industry peers.
- The new investment, which still remains in the negotiation stage, isn't being structured so as to artificially retain the company's last valuation. Stripe is accepting that it's worth less than it was before.
- The potential round's purpose is to cover "double-trigger" tax liabilities for both Stripe and Stripe employees, tied to restricted stock units that are set to expire at year-end. The latter isn't something Stripe necessarily needs to do — it could tell affected workers that times are tough, etc. — but it's the right thing to do.
- Stripe, founded in 2010, has done several tender offers for employees holding stock options (i.e., those hired prior to the implementation of RSUs), although this deal wouldn't be tied to another such tender.
- Yes, Stripe recently fired around 1,110 workers, which certainly was gut-wrenching and fear-inducing for those affected. The only (small) silver lining here was that Stripe included 14 weeks of severance pay, six months of health care coverage, some accelerated vesting and an acknowelegment that the co-founders made "errors of judgment."
Look ahead: Stripe isn't rushing into the round, which reportedly would be led by existing investor Thrive Capital. It's also continuing to explore an IPO, whose proceeds could be used for the same purpose.
- Its only real deadline is Dec. 31, and the company could catch a break if the Nasdaq continues to rebound. Rival PayPal is also up for the year.
The bottom line: Silicon Valley may not have founders less enthusiastic about going public than Stripe's John and Patrick Collison, and there's now a compelling case that they waited too long. Mistakes are important, but so is how they are recognized and rectified.
