The Latest Development in a Broader Trend of Reduced Valuations
T. Rowe Price’s reduction in the value of its stake in fintech giant Stripe is making headlines this week, joining a growing list of investment houses that have cut their valuations of late-stage startups. However, while it is true that T. Rowe Price reduced the value of its stake in Stripe, part of its Global Technology Fund, the latest move is not an isolated incident.
A Broader Trend of Reduced Valuations
The valuation of late-stage startups has been under pressure lately, with several high-profile companies seeing their valuations cut by investors. This trend is not limited to just one or two companies but reflects a broader shift in investor sentiment.
According to reports, T. Rowe Price reduced the value of its stake in Stripe by 64.4% between December and June. While this move is significant, it is essential to understand that the valuation of startups can fluctuate rapidly due to various market and economic factors.
Stripe’s Valuation: Has it Come Down Enough?
Yahoo Finance reports that Block (formerly Square) is worth 2.34x its trailing revenues and PayPal is worth 4.15x its own trailing top line. Applying Stripe’s December-to-June valuation cut to its final private price, Stripe could be worth about $33.8 billion.
Given the limited revenue data available for Stripe, it is challenging to estimate its actual revenue. However, assuming a 5x trailing multiple, Stripe would need to have around $6.67 billion in trailing revenues to support a $95 billion valuation.
Why the Repricing of Stripe?
The repricing of Stripe by its backers reflects a fundamental shift in investor expectations and market conditions. With changing interest rates and investor tastes, startups are facing increased scrutiny from investors, who are now demanding more robust financials and growth prospects.
In this environment, it is not surprising that investors are reevaluating the valuations of high-growth companies like Stripe. The company’s valuation has been under pressure due to its inability to meet investor expectations in terms of revenue growth and profitability.
The Road Ahead for Stripe
As Stripe navigates the complex and competitive fintech landscape, it will need to demonstrate its ability to generate substantial revenue and maintain a strong market position. With in-market battles with competitors like Plaid and the need to argue for a premium valuation compared to public-market comps, Stripe’s road ahead is replete with challenges.
However, as the company continues to scale and expand its offerings, it has the potential to justify a higher valuation in the eyes of investors. The question remains: will Stripe be able to meet investor expectations and maintain its position as one of the most valuable fintech startups?
Topics
- EC Fintech
- EC Market Analysis
- Fintech
- Fintech valuations
- Plaid
- Startups
- Startups
- Stripe
- Venture
About the Authors
Alex Wilhelm is a Senior Reporter for TechCrunch, covering markets, venture capital, and startups. He is also the founding host of TechCrunch’s Webby Award-winning podcast Equity.
Mary Ann Azevedo is a Sr. Reporter for TechCrunch, with over 20 years of business reporting and editing experience for publications such as FinLedger, Crunchbase News, Crain, Forbes, and Silicon Valley Business Journal.