How to Invest in Stripe

Stripe is one of the hottest companies in the start-up world. Brothers Patrick and John Collison founded the company in 2010 to process internet payments. Their start-up quickly caught the attention of Elon Musk and Peter Thiel, early co-founders of the companies that became payments processor PayPal (PYPL 2.65%).

Stripe has also attracted the attention of several other venture capital investors who see promise in the company's technology. Their interest has sent the company's private market valuation soaring.

Stripe has become a leading payment processor for merchants, especially those operating online. Its technology allows them to accept credit and debit cards, process payments from mobile wallets, and use buy now, pay later services.

Stripe gets a cut of every payment (a small flat fee and a percentage of the transaction). The company processed more than $1 trillion in total payment volume in 2023, a 25% increase from the prior year.

The company is growing rapidly as more merchants use its technology to process payments, driving up its private market valuation. Many more investors wish they could own shares of the highly valued private company.

Here's a look at how to invest in Stripe and factors to consider when evaluating the company.

Publicly traded?

Is Stripe publicly traded?

As of mid-2024, Stripe had yet to complete an initial public offering (IPO). Since it's not publicly traded, you can't buy shares of Stripe on a stock exchange.

Will it IPO?

Will Stripe IPO?

As of mid-2024, Stripe didn't have an IPO on the calendar. However, the company's co-founders reportedly told employees it would decide whether to go public within the next year.

The company was deciding between a direct listing and letting employees sell shares on a secondary market. It hired investment banks Goldman Sachs (GS 1.86%) and JPMorgan Chase (JPM 3.55%) to give it advice on the best path forward.

It opted for the latter route in early 2024, agreeing to a deal that allowed employees to sell their shares to investors at a $65 billion valuation. That deal reduced the near-term pressure to complete an IPO, likely delaying it by one to two years.

How to invest

How to invest in Stripe

Although Stripe isn't a publicly traded company, its shares have been available on secondary platforms like EquityBee and Forge Global (FRGE 0.85%). These online platforms enable employees working for a start-up to exercise their stock options and get shares in a company before its IPO, which they can sell to other investors.

The platforms allow accredited investors (i.e., those with a high net worth, high income, or a securities license) to invest in venture capital-backed start-ups. Accredited investors on EquityBee, for example, fund employee stock options, allowing them to own stakes in private companies at previous valuations. Investors then receive a percentage of the future sales of these options when the company completes a liquidity event, like an IPO.

Alternatives

Alternative ways to invest in Stripe

Although Stripe isn't a publicly traded company, several competitors operating similar business models trade publicly. Notable fintech stocks that compete directly with Stripe include:

1. Block (SQ 2.1%): Block has a growing financial services platform, including Square, which processes payments.
2. PayPal: PayPal is one of the world's largest payment processors. Almost 80% of the largest retailers in North America and Europe accept PayPal.
3. Adyen (ADYE.Y -0.54%): Adyen offers merchants many ways to process payments.

Investors interested in Stripe might want to take a closer look at publicly traded options while they await its potential IPO.

Should I invest?

Should I invest in Stripe?

While you can't invest in Stripe yet, following are some factors to consider about the company if it does complete an IPO in the future.

Profitability

Is Stripe profitable?

According to The Information, Stripe turned the corner on profitability in 2023. The company grew its revenue by 35% in the third quarter of that year while generating $150 million in operating income. The company's profitability got a boost from its cost-cutting efforts in 2022.

Stripe is also generating positive cash flow. According to its annual letter, it hit that level in 2023 when it was "robustly cash flow positive." Stripe expected that trend to continue in 2024. The company's ability to produce cash reduces the need to go public to raise funds. It has reached the point where it can internally finance growth.

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Revenue

Stripe's revenue

Stripe doesn't publicly disclose its revenue. However, a report by the Financial Times indicated that the company recorded $1 billion of net revenue in the third quarter of 2023. That implies it's on a roughly $4 billion annual net revenue run rate.

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