Unpacking Stripe’s $600 Million Infusion

Funding Watch is Localogy’s series that tracks funding to SMB-focused startups and tech providers. See the rest of the series here.

Even in uncertain times, tech companies are getting funded. Last week, we went deep on a few recent examples, most of which were initiated prior to the early-March beginnings of Pandemic mass-realization. Regardless, the current environment is conducive to some businesses more than others.

Along with video conferencing, gaming and e-commerce, payment processing is on the right side of that divide. The latest validation is Stripe’s $600 million infusion last week. Technically, it’s an extension to a $250 million Series G raised in September and gives Stripe a $36 billion post-money valuation.

As a democratization play for payment-gateway functionality and processing ability, Stripe has become a darling of the SMB SaaS landscape.  In the current environment, the need for online transactions amplifies as SMBs scramble and get creative with quarantine-friendly ways to sell and deliver products.

“People who never dreamt of using the internet to see the doctor or buy groceries are now doing so out of necessity. And businesses that deferred moving online or had no reason to operate online have made the leap practically overnight,” Stripe co-founder and president John Collison said in an announcement. “We believe now is not the time to pull back, but to invest even more heavily in Stripe’s platform.”

Beyond adoption in the aggregate, payment processing volumes on a per-SMB level could grow in the current environment if online/mobile ordering grows. That could be offset to some degree by lowered consumer confidence and spending in a downturn, but Stripe could still see a net gain in the shift to online ordering.

Beyond SMBs — and Stripe’s value proposition to lower traditional barriers for getting paid — the company works with larger and mid-market players. One segment Stripe has seved years is the on-demand economy. Instacart, DoorDash, Blue Apron, Caviar, PostMates and several others use Stripe.

Meanwhile, Stripe has $2 billion on its balance sheet which puts it in a strong position for weathering the storm. Additional funding pads its cash reserves during a time when VC dollars are still relatively cheap. The window on that opportunity is closing fast. This also lets it continue to grow without going public.

Participants in the latest round include existing investors Andreessen Horowitz, General Catalyst, GV and Sequoia; and this brings Strip’s total funding to $1.6 billion. We’ll keep watching for Stripe’s activity following this funding, as well as any other money that changes hands in the SMB SaaS landscape.

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