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Looking at the numbers and making some estimates... $10 billion in transactions probably turns into about 1% in fees, so we'll say revenue is about $100 millio
by programminggeek 13y ago
Looking at the numbers and making some estimates...
$10 billion in transactions probably turns into about 1% in fees, so we'll say revenue is about $100 million. Being generous, let's say they are running on a 30% margin. That would put profits around $30 million a year.
That's pretty good, but when you look at that number it would be a 10 year payback period at $300 million. At $1 billion, that is a 30 year payback period.
Given the $69 million in outside funding, I'm sure they are pushing for a 10x return, so $690 is probably the ballpark of the asking price. They are probably asking for $1 billion in hopes of a counter around $750 million.
If I were a company looking to acquire a merchant services provider, I would look at the cost of acquiring that $10 billion a year in transaction volume. Is it less than $1 billion? Probably. That is probably why MasterCard built this: https://www.simplify.com/commerce/ https://www.simplify.com/commerce/ instead of dropping $1 billion to buy stripe or Braintree.
If you didn't have a big strategic need, the right price for Braintree is probably more like $200-300 million. Braintree won't sell at that valuation because they have raised too much money and it wouldn't be a big enough return.
I could see PayPal buying Braintree, just for some of the more developer focused company culture, but I don't see why Square would buy them.
My guess is Square and Stripe end up merging at some point. It almost feels inevitable.
- frankdenbow 13y agoI have also thought that square and stripe could merge but I think both companies have enough potential upside on their own to keep forging ahead without it.
- jacquesm 13y agoIs the founding team of braintree still in control of the company?
- Osiris 13y agoNo. According to the article, the investors kicked out the founder in 2011 and brought in a new CEO with a history of getting companies acquired.
- scalenemuscles 13y agoI think it's relevant to point out the former CTO explicitly stated earlier today in the thread that the founder wasn't kicked out: "I'm the former CTO of Braintree and one of the founding employees. I was there when Bryan Johnson hired Bill Ready as CEO and decided to move to Chairman. The authors of the TechCrunch article were either misinformed or speculating when they said that Bryan "lost his position" and that Bill joining was a "decision made by Accel." Bryan made the decision to hire Bill and move into the Chairman role without pressure from anyone." https://news.ycombinator.com/item?id=6338053 https://news.ycombinator.com/item?id=6338053
- vidarh 13y agoThat may very well be true - if he wants the company sold, why not, especially if he wants to avoid getting tied into working for an acquiring company for years. That said, I've also been involved in a company (as co-founder) where finding C-level execs to parade around to state that the CEO (one of my co-founders) left voluntarily would be easy enough. Most of them wouldn't know differently either, not having been privy to the conference calls where the investors made it clear they'd find an excuse to fire him for cause and tie him up in court over his shares for the next few years if he didn't "volunteer" to take 6 months pay, put on a brave face and leave. What most of them saw was the show my co-founder put on to get the best deal possible and leave gracefully. I'll hasten to add that I don't know this guy, so for what I know he was in the room for every conversation Bryan Johnson had with the investors at Braintree or otherwise actually did have the inside track. Just pointing out that it's also easy to think you have the inside track on these types of things without having a clue about what actually went on.
- jacquesm 13y agoSecond this. There can be many layers of understanding to things like this and it is all too easy to think you were an eyewitness to a real life event when in fact you were just watching a well-choreographed ballet.
- rmrfrmrf 13y agoIt's pretty selfish of me, but I hope that Square and Stripe stay separate because I think they both keep their competitors, er... competitive, and honest. Both companies are a pleasure to work with, so I have a[n irrational?] fear that they'll become less customer focused by merging and becoming a large force in the payment arena.