Posted on Thursday, Dec 8th 2016
According to eMarketer, about 8.7% of retail commerce all over the world is expected to be conducted online in 2016. While retail commerce is expected to grow 6%, online commerce is expected to grow much faster at 23.7% in 2016. The fast growth in online sales is the primary reason for the skyrocketing valuation of Billion Dollar Unicorn Club member Stripe, which facilitates payments over the Internet.
San Francisco-based Stripe was founded in 2010 by brothers John and Patrick Collison. They wanted to set up an online platform to simplify the process of accepting payments for websites and apps. It enables companies to set up credit card processing capabilities on their digital pages by just embedding a simple code.
It soon became popular with several new age startups like Lyft and eyeglasses retailer Warby Parker that wanted to avoid the pain of tying up with banks for online transactions. Recently, Stripe has added traditional merchants, such as Target to its client list. Today, it has users in 110 countries.
Stripe’s competitors include Braintree, which was acquired by PayPal in 2013; Dutch startup Adyen valued at $2.3 billion in 2015; and WePay.
Stripe recently launched a service called Radar that uses Stripe’s transaction data to detect fraudulent payments. It also launched Atlas to enable entrepreneurs all over the world to use American payment infrastructure and incorporate a business in the US.
Stripe is a venture funded company and does not disclose its financials. It has so far raised $440 million from investors including CapitalG, Visa, American Express, Peter Thiel, Elon Musk, General Catalyst, Sequoia Capital, Elad Gil, Redpoint Ventures, Chris Dixon, Aaron Levie, Khosla Ventures, Founders Fund, Allen & Company, Andreessen Horowitz, and Kleiner Perkins Caufield & Byers. Its last round of funding was held in November 2016 for $150 million when its valuation doubled to $9.2 billion. An earlier round in July 2015 for $90 million valued it at $5 billion. In December 2014, the company had raised $70 million at a valuation of $3.5 billion, having grown from a $1.75 billion valuation round held in January 2014.
Stripe has also obtained a revolving credit facility of up to $250 million from JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Barclays.
Stripe plans to use the funds for faster international growth, acquisitions, developer tools, and new software to help businesses in different ways. This year, it launched in Japan, France, Singapore, and Spain. It acquired app prototyping startup Tonic or Runkit in September 2016, identity verification app developer Teapot in October 2016, Instagram marketing firm TOTEMS in 2015, and chat and task management app Kickoff in March 2013.
The excitement about Stripe is understandable, but it should tread carefully and focus on fundamentals before considering IPO plans. With its $5 billion valuation, it was seen as a hot IPO prospect in 2016 and will be considered hot for 2017 as well. But will it be able to sustain these skyrocketing valuations under public scrutiny?
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
Photo Credit: Luigi Mengato/ Flickr.com
This segment is a part in the series : Billion Dollar Unicorns
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