Stripe: Tech Investor Interest Stirring Anew?

The valuation game may be stirring anew. And might this be a company, eventually, that helps tech names be painted with a Stripe of a different color? (Pun intended).

The most recent equity raise by Stripe, the payments processor, at $150 million, has given the firm an implied valuation of $9.2 billion. Aside from the fact that that staggering number, on paper, has made a few investors and founders rich (again on paper), the headlines may have implications for a once moribund tech IPO market that over the past few months has gotten a half-shot in the arm.

As is almost always the case with fast-growing companies that are not publicly listed, Stripe’s financials are kept hush. So looking toward any sense of how big the firm requires some back-of-the-envelope calculations. Bloomberg has taken a stab at it, taking at its starting point that the firm can do 80 percent of the volume that Square does, at $46 billion on a trailing basis and that depending on a range of 2.5 percent to a little less than 3 percent of that as processing revenues. Thus the top line for the company could be as much as $1.1 billion, and so the implied price-to-sales multiple dictated by the latest implied market cap is nine to 10 times. That multiple range is richer than more mature companies within payments such as First Data or even Square, at one to three times. Bulls would say that a premium multiple should be assigned to a firm making a niche in online payments rather than within the havens of brick-and-mortar locations.

But there’s another tell from Stripe, one that speaks to broader markets, the ones that serve both private companies and public ones — without speaking specifically to what may or not be on Stripe’s profit-and-loss statement.

Consider the fact that the latest capital raise was led by Alphabet’s Capital G investment vehicle (Alphabet, of course, is the parent company of Google). That’s a marquee name, but the important data point is that the valuation got doubled on that $150 million injection. Two thoughts here: First, money is waiting to be put to work, and second, there’s obviously excitement about the growth prospect of the company, likely because there may be excitement about the small business segment that it looks to serve. It would not be too far-fetched to think that that excitement about the small business environment may come from the stimulus that is being promised from an incoming, Republican-dominated administration (and you know, it’s partly the promise of stimulus that has stimulated the Dow Jones Industrial Average).

What about the public markets? True, Stripe was a rumored candidate into this year, and then there were several tech companies that went to market and then fizzled, out of the gate, sporting valuations lower than the ones given to them by private investors. Those precipitous drops often happened at times of market volatility. Now, with markets topping themselves again and seemingly again without end, money follows money. That may or may not be the smart path to follow, but it does indicate that investors are thinking big-league again.