Sequoia, a Leading Investor in Stripe, Validates $70 Billion Valuation, Presenting a Windfall to Its Backers

Financial services behemoth Stripe has postponed its market debut for an extended period, prompting significant investor Sequoia Capital to explore innovative strategies to provide returns to its stakeholders.

Sequoia Capital reached out to LPs in funds initiated from 2009 to 2011, proposing to acquire up to $861 million of Stripe shares, as per a report by Axios here. While Sequoia has not provided comments, the proposition entails selling these shares to other, more recent Sequoia funds, based on the details Axios shared from the communication to LPs.

This action is indicative for a couple of reasons. First, it signals that LPs are eager for cash returns in a market where IPOs are scarce. (Only four venture-backed tech IPOs have happened in 2024 so far — Reddit, Astera Labs, Ibotta, and Rubrik — throughout March and April.)

More importantly, it shows Sequoia’s confidence in both Stripe’s potential and its ability to provide a significant exit strategy for its investors. Sequoia expressed in the letter to LPs its “high optimism for Stripe’s prospects,” citing the company’s resilience through various economic conditions.

As of March 2021, Stripe’s valuation reached $95 billion, ranking it among the most valuable private companies globally, on a fast track towards a highly anticipated IPO. By January 2023, Stripe had given itself a 12-month timeline to either go public or explore private market transactions, including fundraising events or a tender offer.

Ultimately, Stripe chose the latter path.

In the previous summer, Stripe’s valuation was adjusted to $50 billion during its Series I funding round, collecting $6.5 billion, a sharp drop from its peak valuation. In February, TechCrunch revealed that Stripe had arranged with investors to provide liquidity options to its current and former employees through a tender offer, valuing the company at $65 billion. Although this was an increase towards its peak, it still didn’t match the highest valuation.

Yet, with a valuation of $65 billion, Stripe continues to be among the most valuable startups globally here.

Since 2011, Sequoia’s investment in Stripe totals $517 million. Sequoia informed LPs that Stripe’s recent 409A valuation was marked at $70 billion, valuing Sequoia’s shares at $9.8 billion. In 2023, it was reported that Sequoia returned $10 billion to its investors.

Following a significant tender offer from Stripe and Sequoia’s strategy to provide payouts to earlier funds, it appears that Stripe might not be considering an IPO in the near future. Additionally, Sequoia’s Luciana Lixandru and Kevin Kelly, from Sequoia Heritage, are members of Stripe’s board, suggesting they possess insights into Stripe’s financial strategies. Lixandru took over Michael Moritz’s position after his December departure from the venture firm.

The possibility exists that Stripe may never enter the public market. Despite facing increased competition, Stripe, a 15-year-old entity, has shown remarkable growth. In March, Stripe highlighted in its annual review the achievement of surpassing $1 trillion in total payment volume in 2023, following a 25% increase in payment volume. The company also noted it was “strongly cash flow positive in 2023” and anticipates a similar outcome in 2024, indicating the absence of immediate capital raising pressures, even as it explores avenues for employee and investor share sales.

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