Payments giant Stripe has long delayed its IPO, prompting lead investor Sequoia Capital to get creative with how it returns profits to its limited partners.
Axios reported that the venture firm emailed LPs from funds it raised between 2009 and 2011 with an offer to buy up to $861 million in Stripe shares. Sequoia declined to comment, but the buyer will be another of Sequoia's new funds, according to the email sent by Axios to LPs.
The move is notable for two reasons: First, it's evidence that LPs are increasingly seeking liquidity in this lackluster IPO market (2024 has seen just four venture-backed tech IPOs materialize so far in March and April: Reddit, Astera Labs, Ibotta and Rubrik).
But perhaps more importantly, Sequoia's stance reflects not only its confidence in Stripe's future, but also its ability to ultimately exit in a way that adequately rewards investors. In its letter to LPs, Sequoia said it is “highly optimistic” about Stripe's future and believes the company has “economic durability.”
In March 2021, Stripe's valuation reached $95 billion, making it one of the most valuable private startups in the world and it appeared to be hurtling towards a long-awaited mega IPO. In January 2023, it was reported that Stripe had set a deadline of 12 months to go public, or it would pursue a private market transaction such as a fundraising event or tender offer.
Clearly I chose the latter.
Last summer, Stripe raised $6.5 billion in Series I funding at a valuation of $50 billion, a significant discount from its peak of $95 billion. In February, TechCrunch reported that Stripe had signed a deal with investors to provide liquidity to current and former employees through a tender offer at a valuation of $65 billion. This means Stripe is on the way to recovering to its peak valuation, but still far from its highs.
Still, with a market cap of $65 billion, Stripe remains one of the most highly valued startups in the world.
Sequoia has invested a total of $517 million in Stripe since 2011. In a letter to LPs, the company noted that Stripe's most recent 409A valuation was $70 billion, putting Sequoia's overall holdings at $9.8 billion. Sequoia will reportedly distribute a total of $10 billion to investors in 2023.
Stripe's big tender offer and Sequoia's moves to return money to its previous fund are another sign that the fintech giant isn't planning an IPO anytime soon. It's also worth noting that Luciana Lixandre, a partner at Sequoia, and Kevin Kelly, a partner at Sequoia Heritage, another asset management business of the firm, both sit on Stripe's board and have inside information about Stripe's financial plans. Lixandre joined the board as director, replacing Michael Moritz, who left the venture capital firm in December.
Of course, it's possible that Stripe never goes public. Despite growing competition, Stripe has continued to grow at a remarkable rate in its 15th year since its founding. In March, Stripe noted in its annual report that payment volume had grown 25% and that total payment volume would exceed $1 trillion in 2023. The company also said it “expects to be cash flow positive in 2023 and cash flow positive in 2024,” meaning it likely won't feel any urgency to raise capital, even as it explores ways to allow employees and venture capital investors to sell shares.
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