IPO Focus

IPO Focus: Stripe, Inc.

  • Private Equity
  • TMT
  • North America

Based on Forum Interviews, IPO Focus offers expert insights into the companies behind some of the most notable IPOs of 2022.

Could Stripe IPO be biggest ever?

When Irish brothers John and Patrick Collison founded online payments platform Stripe in 2010, neither imagined it would become one of the most valuable private companies in Silicon Valley.1

In 12 years, the brothers from County Tipperary have built a financial services and software platform valued at USD 95bn in March last year. Now, on the cusp of one of the biggest IPOs in history, this IPO Focus draws on expert insights from a former Stripe executive to understand the company’s growth potential and operating environment. 

Our specialist told Third Bridge Forum that Stripe, like other fintech companies Paypal and Adyen, has “benefited” from COVID-19 moving businesses online. They said its product Stripe Connect, which allows multi-party payments, offers “a lot of advantage to platforms of all size[s]” and has better fraud prevention and detection solutions compared to other vendors. The specialist said 40-50% of Stripe’s payments volume comes from Connect and is a “better, faster solution” than other payment facilitators. 

“Stripe, it is one of the best products out there. I think the calibre of people at Stripe is just very high. They are very selective, they’re attracting the best talent from different companies in Silicon Valley” – A former executive at Stripe describes the company’s competitive advantages

The specialist said Stripe was slow to expand into other countries but has “really invested” in its technology and infrastructure, to the point that it is now launching in up to 10 countries a year. In 2020, it acquired Nigerian fintech company Paystack, which the specialist said was a “great step” and gave it “first-mover advantage” in the African market. 

Stripe is also starting to make inroads with larger enterprises, initially focusing on working with start-ups. In 2020, it began partnerships with SalesForce and Shopify – the latter of which is a “huge” customer for Stripe.

However, according to the specialist, Stripe’s reliance on “a few large customers” is a “revenue risk”, particularly if Shopify builds its own platform in-house. With growing competition from Adyen and emerging fintechs, Stripe must also ensure it can differentiate itself in markets outside of the US and support local payments methods. 

Product expansion would help with that differentiation, we heard, and the specialist highlighted identity verification and authentication, insurance and buy now, pay later services as products that could be added to Stripe’s roster “over time”. The specialist also said data it has acquired on, for example, customer payment history and purchasing behaviour could be used to enter consumer banking.   

Long term, our specialist said Stripe and the broader payments market will continue to grow. But whether Stripe can overtake Adyen in upper-mid and enterprise markets in the next five years remains unseen. 

For more human insights on Stripe and its competitors, click on the transcripts below.

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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