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Stripe announces new round of funding and plan to provide employee liquidity
- akavi 4y ago48% discount from peak valuation (95 G$ in Mar 2021). Ouch.
- schnebbau 4y ago95 Gazillion dollars?!?!?
- jefftk 4y ago"G" for "Giga", 1e9.
- reikonomusha 4y ago"giga-dollars" i.e. 1 billion dollars
- lemoncucumber 4y agoI prefer to use gibi-dollars ($1073741824)
- djbusby 4y agoI read "Giga Dollars". To remove the ambiguity of Million, Billion, Millard, Long Million and Short Million perhaps.
- airstrike 4y agoHmm.. but there's no ambiguity in "billion"? There's certainly less than in "giga dollars"
- djbusby 4y agoBillion is different in Short (10^9) vs Long (10^12) scale. See: https://en.m.wikipedia.org/wiki/Long_and_short_scales https://en.m.wikipedia.org/wiki/Long_and_short_scales
- airstrike 4y agoThe short scale isn't a thing in English or when talking dollars which is implied by the dollar sign in "$95 billion" and the fact that this is a US company "$95 billion" simply means $95,000,000,000.00 and there's no ambiguity...
- djbusby 4y agoA thread on HN yesterday regarding Credit Suisse where this ambiguity came up. That thread was in English and was about US Dollars.
- kaashif 4y agoAre you talking about this comment? https://news.ycombinator.com/item?id=35152388 https://news.ycombinator.com/item?id=35152388 That doesn't read like anyone is actually confused over the meaning of "billion" , it seems like people are just speculating on whether this error is long/short scale confusion between languages. Personally, I think it was just a typo - there is no conceivable way that a billion CHF could ever be a million USD regardless of the scales used... Apologies if you're referring to a different comment.
- fnordpiglet 4y agoInflations a monster
- enahs-sf 4y agoSteep haircut, but 50% of something still better than 100% of nothing.
- cperciva 4y agoTo be fair, 30 year treasuries have fallen almost as much. Did Stripe's valuation drop, or did the long-term value of today's cash increase?
- thaumasiotes 4y agoDoesn't the long-term value of today's cash move in the opposite direction of the inflation rate?
- fnordpiglet 4y agoI think they’re referring to net present value of future cash is determined by the difference between interest rates and inflation discounted over time. As inflation has gone up so have interest rates. Cash today is worth more in the future, especially if inflation is tamed and you locked in a good interest rate on a long dated bond.
- cperciva 4y agoSort of. The value of companies is (meme stock speculation notwithstanding) the net present value of their future cash flows; for startups that tends to be far into the future cash flows. It's only natural that the price drops when interest rates go up.
- thaumasiotes 4y agoBut that's due to noncash instruments having higher-than-previously nominal yields. The long-term value of cash is unaffected. (Except to the extent that the higher opportunity cost of holding cash lowers the value of cash.)
- lmm 4y agoThis is about the opposite of long-term value, it's about the value of cash right now. This deal is mainly about letting Stripe employees cash out today, and high inflation means cash today is scarce/expensive.
- nprateem 4y agoLooks like they tried to time the market and failed. Smells like greed to me.
- nrmitchi 4y agoThat's a fair point, but wasn't that $95B valuation based on an ~$500M fundraise primarily to the irish government (as well as, I'm assuming, any funds that had participation rights)? I'm not saying it doesn't look like a bad drop in valuation, but it's not clear that the $95 valuation would have been supported by any larger.
- margorczynski 4y agoThe company is 12 years old, the biggest player in their domain (online payments) and still needs that much funding? Where is it time to turn the knobs and start producing income?
- kansface 4y ago> The funds raised will be used to provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors. Stripe does not need this capital to run its business.
- bootsmann 4y ago> The funds raised will be used to provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors. *Stripe does not need this capital to run its business.* It’s the second paragraph of the OP
- thgirhet 4y ago[flagged]
- tamade 4y agoThat last sentence is corporate PR spin. They very much need this capital to run the business, ie, they didn't have enough money to pay taxes.
- zaroth 4y agoThey aren’t raising the money to pay corporate taxes. They are doing this so their employees can pay taxes on otherwise illiquid shares (i.e. taxes the employees can’t afford).
- 4y ago
- sb8244 4y agoI'm a bit cynical when I see stuff like this. Is it a way for the company to exit employee shareholders and put that equity into investor hands? Especially at a discount from peak? That can be good for employees (money in your bank is a good thing), but only if they want to sell. Edit: there's another thread with more info. This round looks to address a specific issue that would affect employees very negatively. So it seems like a good thing and not corp greed.
- auntienomen 4y agoIt depends whether current employees are getting their next RSU before or after this down-round.
- Zetice 4y agoI thought a frequent reason for this kind of thing was that they had planned on doing an IPO which would have also let employees sell (eventually, after a lockup period?) but given the current market they're waiting. Also didn't another company recently do this because of some expiring stock options? If employee options expire that's basically a death knell to your ability to recruit and those employees would all hate you and quit. Maybe there's some of that going on here.
- sb8244 4y agoI think you're right after reading more. Sounds like RSU are expiring. Not sure about options but 10 year is the options limit so that would align with the age of the company.
- kevinventullo 4y agoI suspect it will generally be good for employees. In my relatively recent job search, I was considering Stripe versus some large publicly traded tech companies. I ruled out Stripe largely because the equity would not be liquid.
- thaumasiotes 4y agoWhat does the tax treatment look like? I'm aware of the following: 1. Get options, pay nothing. 2. Exercise options, pay AMT. 3. Sell stock, pay capital gains. (Please point out anything missing; it's missing because I don't know about it.) Assume that the timing of step 2 is nondiscretionary and the stock price is temporarily depressed when it occurs. Assume that you have to pay the AMT by selling some of your stock until you've sold enough to cover the whole AMT. If the AMT is a lump sum (seems... unlikely?), then the depression in the price at the moment you have to pay it is bad for you. If the AMT is a percentage of the value of the stock (my guess?), then by the assumption that you have to pay for it by selling stock, you're going to lose a fixed percentage of your stock no matter what the current stock price is. If we relax that assumption and you take out a loan to pay the AMT, the depression in the stock price is good for you, because you end up making a profit on holding your shares while they recover. In step 3, you sell your stock at the "natural" price. I guess that since the stock was temporarily depressed, it's now higher and you pay a capital gains tax on the difference. Is the tax rate higher or lower than the rate you paid for the AMT? If it's equal, what difference did the temporary depression of the stock price make?
- thaumasiotes 4y ago> Stripe [] has signed agreements for a Series I fundraise of more than $6.5 billion (€6.15 billion) at a $50B (€47B) valuation. Primary investors include ... > The funds raised will be used to provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors. Stripe does not need this capital to run its business. As I read this, the plan is to issue a number of shares, buy exactly that many shares from Stripe employees, and retire the purchased shares. Why do it that way instead of allowing the employees to sell their shares into the Series I offering?
- boucher 4y agoI imagine it's as simple as employees own common stock and investors want preferred stock.
- bootsmann 4y agoProbably easier to do legally. Usually your option shares have a clause that you are not allowed to sell them on the secondary market (which this would be).
- tqi 4y agoFor people with expiring RSUs, is the choice then to take this deal (@ at 50 billion valuation) or get nothing?
- HDThoreaun 4y agoI think it's this, or keep the shares and pay taxes yourself.
- auntienomen 4y agoNo, it's not take it or get nothing. People have RSUs. Those RSUs vest at some point. When they vest, they have to pay taxes on them, at whatever value they have at that moment. This raise allows Stripe's employees to pay those taxes, and gives them a chance to sell if they want to. If they don't sell, they'll have to wait for future liquidity events, like private raises, buybacks from Stripe, or IPO. The down round is appealing if you're intending to hold the shares until later, because you pay employee taxes at a low valuation, and then capital gains on the difference between that low valuation and your eventual sale price.
- magneticnorth 4y agoDoes this imply that Stripe thinks an IPO in this market would value them lower than $50B?
- auntienomen 4y agoNot really. On general grounds, you expect to take a haircut when you offer shares privately, because there are fewer investors competing for the shares you're selling.
- bfeynman 4y agoor fact that private investors are looking at making their own return.
- blobbers 4y agoNo, not at all. Nobody would invest if they thought that were the case. It does mean they believe they will need to delay their IPO a year or more.
- cperciva 4y agoIt might be a matter of executive preference. Lots of people don't want to deal with the regulatory attention and mandatory reporting which comes from a company being publicly traded.
- rvz 4y agoAt this point, they might as well do a direct listing. Raising more money would just cut their valuation further and as soon as they list everyone can dump 20% of their holdings to provide liquidity. But either way, they should have at least IPO'd in 2019, just like the rest of the companies out there who raced to the exit [0] [1] instead of a 50% valuation cut from $95BN. [0] https://news.ycombinator.com/item?id=20993919 https://news.ycombinator.com/item?id=20993919 [1] https://news.ycombinator.com/item?id=31062658 https://news.ycombinator.com/item?id=31062658
- steponlego 4y agoPlan to provide employee liquidity? Is this just a euphemism for "paying them?"
- jon-wood 4y agoIt’s too allow employees to cash out share options without the company having to go public or be sold.
- ZephyrBlu 4y agoSeries I lol. I think the latest funding round I've seen prior to this is a Series G, but really anything past D/E seems rare.
- tough 4y agoGood thing it looks like a 1 Thank romans
- DueDilligence 4y ago[dead]
- lechacker 4y agoA 50% drop is a big oof moment for Stripe. But then again I don't think the company was every really worth +90b dollars. If I were an employee I'd take the liquidity now before this goes the way of WeWork
- jzoch 4y agoIt’s not an oof moment at all - this decrease in valuation is inline (actually less) than most of their peers in the same time frame. The economy is very different from when they last raised.
- brendonjohn 4y ago> the way of WeWork That's an unreasonable comparison. Stripe is not deeply tied to commercial office real estate.
- missedthecue 4y agoIt's tied to arguably a worse asset base: tech startups
- brendonjohn 4y agoHah, touché. To counterpoint, their success is probably correlated with consumer spending habits (If consumers don't spend, transactions aren't happening, Stripe isn't getting its commission) The case against Stripe probably sits with an understanding of how an incoming recession will impact the volume of transactions Stripe is dealing with.
- shapefrog 4y ago> If I were an employee I'd take the liquidity now before this goes the way of WeWork To take the liquidity an investor has to give the liquidity - if all the employees on the inside believe in the mission so much that they want to sell ...
- paxys 4y agoStripe missing the 2018-2021 tech IPO window is going to be seen as a historic business decision making failure. Everything was in their favor. They could have sleepwalked into a $120B+ market cap. All employees and investors could have had as much liquidity as they desired. But for whatever reason the founders stuck to their "we will stay private forever" stance, and the entire company is suffering because of it.
- htrp 4y agoprobably not as bad as the wework botched ipo.... but your point remains
- lotsofpulp 4y agoWework had indefensible problems with their business model, hence sinking even in the frothiest of times. Stripes would have surely fared much better.
- paxys 4y agoWework's problem wasn't timing. They actually chose to go public under perfect market conditions, just that their underlying business was so out of touch with reality that not even the most optimistic institutional investors or bankers could digest it.
- TheNewsIsHere 4y agoI have been reading Billion Dollar Loser by Reeves Wiedeman. That out of touch quality that seemed to permeate WeWork was seemingly there from the beginning, courtesy of Adam Neumann. To say that he comes off looking delusional is being kind.
- fnimick 4y agoAnd yet somehow whenever he sneezes he finds investors willing to throw millions upon millions of dollars at him. https://www.nytimes.com/2022/08/15/business/dealbook/adam-neumann-wework-startup.html https://www.nytimes.com/2022/08/15/business/dealbook/adam-ne...
- fbabs 4y agooverrated company with bad foresight to read the trend. Maybe paystack is a terrible acquisition anyways.
- Idiot_in_Vain 4y agoRaising money now means they probably expect the financial industry to go further down.
- c7DJTLrn 4y agoWill any of the funding go towards improving the customer experience? HN has been a Stripe support hotline the past few months.
- jrdngonen 4y agoTender offers can be pretty tricky for employees to navigate Put together a quick guide all about taxes/financial implications of participating in a tender offer: https://manual.withcompound.com/chapters/what-to-do-if-your-company-has-a-tender-offer https://manual.withcompound.com/chapters/what-to-do-if-your-...
- atomicnumber3 4y ago"A tricky part of this is trying to guesstimate what your stock could be worth in the future." Tricky, yes, quite.
- newaccount2023 4y agowell on its way to a $15bln valuation, just a matter of time
- jongjong 4y agoIf I was an employee of such company, I would just sell all my equity as soon as I got it. I suspect they have no clue how insanely lucky they are and how many forces have worked in their favor behind the scenes to put them in such fortunate position. After such insane winning streaks, it's the less arrogant ones who understand their luck who get to keep the spoils.
- bink 4y agoThese offers usually don't let you sell 100% of your shares. I was at a company that did two offers before the IPO and the most you could sell was 20%.
- mtremsal 4y agoTypically with the max % going down if the tender offer is oversubscribed.
- myhrvold 4y agoYeah Uber had this, twice actually as a private company; once with Softbank in January 2018. And then again with Coatue / a few other investors in July 2018. There's a bit of game theory at stake, as to what you tender. You want to cash out a certain amount to diversify... but if too many people say yes, then your stake is whittled down to due to oversubscribed interest on the selling side. You get one shot to put in for your % number, and it will either be that, or proportionately lower depending on every other eligible employee's interest in selling. I recall the max was throttled at 50% vested shares, or something like that anyway for Uber. And you had to have a minimum number of shares vested to participate (low tens of thousands overall as I recall?) Anyhow, I put in for the maximum both times which worked out because that % got whittled down since the tender offer was filled on both occasions (as I recall). (P.S. Not that it matters for the story, but $40/share in July 2018 and just under $33/share in January 2018 ended up working out great compared to what happened subsequently.)
- fairity 4y ago
- par 4y agoThere were a lot of offers to buy into this last funding round, and I gotta be honest the price point was not appealing.
- hgsgm 4y ago> Stripe benefits from the early role it plays in technology waves that reverberate across the industry, like mobile marketplaces, SaaS, and now AI, with users like OpenAI, Anthropic, Midjourney, Copy.ai, CoreWeave, and a long list of others. So does Starbucks, by selling coffee to those companies' employees.
- booi 4y agoAre you talking about the $115B company that basically only sells coffee, has a literal giant of a rewards program that also generates billions of dollars a year? Yah, sucks to be starbucks.
- di456 4y agoWhat prevented an IPO?
- swellguy 4y agoEek, why don't we fix AMT and stop treating employees so poorly? This whole scheme is utterly repellent to me and makes me feel incompetent to have to read and consume it. Why so many stratagems around something that is literally incompetent?
- makestuff 4y agoEven in the best case of startup outcomes it still seems like they find a way to screw you over unless you have preferred shares. Sure there are the few lotteries that hit, but overall it isn’t a great deal. I wonder if we will see more startups just start to offer all cash.
- tnel77 4y agoMy understanding is that preferred shares are only important if the company doesn’t have a high enough valuation. I won’t pretend to be an expert on the matter though.
- deleted 4y ago[deleted]
- GorgakTheAlien 4y agoWhat's with all this talk of "employee liquids" and where can I purchase them? Are they made of real employees? How are these liquids rendered? Some kind of masher, or industrial grinder perhaps? How is it determined which employees are rendered into liquid and which ones are not? A merit-based review, or perhaps a lottery system? What are the uses and health benefits of consuming employee liquid? What does it taste like?
- ipv6ipv4 4y agoSo given Stripe’s record so far of never wanting to go public, what’s the incentive to buy into this funding round?
- zdbrandon 4y agoHoping for greater fools in the private market I presume. Sort of like "why buy stock in a public company that never pays dividends?"
- beebmam 4y agoStock options are so fucked. I'll never go back to the startup world without actual compensation.
- faangiq 4y agoSo even the peak bubble boys with a real company are down 50%? That means every other private mark down is 80-90%+… Now you see why they panicked over SVB.
- figassis 4y agoI think we should accept that this is a good move and leave it at that. I remember a thread a few weeks back where we were criticizing stripe about the incoming deadline and how stripe would end up screwing early employees. Now they made the correct move and the conversation switches to “they should have exited earlier?”. This is an impossible crowd to please. Everyone makes mistakes and mistakes at that scale will always have gigantic implications. They resolved it.
- ccn0p 4y agoAgreed but this wouldn't be the Internet if it wasn't critical about something, so that's just how it goes.
- banjodebanks 4y agoI'm not so sure about this, but can we really say that they're just trying to hype their upcoming IPO a bit more? Who knows though. Also, I am thinking they might be on the right path to further delay their IPO because of the current market condition.
- dougSF70 4y agoThey definitely missed the opportunity of a lifetime, the numbers must have looked unusually poor to have not made the decision to IPO in 2021.
- spaceman_2020 4y agoWhat happens to all these decade+ year old startups in the event of a recession and/or market collapse? You might be looking at 5 or more years before market conditions are conducive for loss-making startup IPOs. Stripe is better than most of course, but plenty of 10-15 year old startups with negative cash flow and no exit path for another 5 years.
- dougSF70 4y agoSeries K,L,M rounds,or venture debt or trading to $0
- rapht 4y agoAh, financial gravity comes to unicorns. 20x EBITDA starts looking reasonable, instead of the previous 40x.
- ptnxlo 4y agoThe same Stripe we read complains and Tell HN stories every month ...