Sequoia Capital, Stripe’s primary investor, is employing unconventional strategies to provide returns to its limited partners due to the company’s protracted delay in going public
The venture firm contacted limited partners (LPs) in funds raised between 2009 and 2011 via email with an offer to purchase up to $861 million in shares of Stripe, according to Axios. Sequoia has declined to comment; however, the email sent to limited partners, which Axios shared, indicates that the purchasers would be other, more recent Sequoia funds.
The relocation is noteworthy for two reasons. Firstly, it indicates that limited partners are increasingly anxious for liquidity in the current barren IPO market. Reddit, Astera Labs, Ibotta, and Rubrik are the only venture-backed technology IPOs announced thus far in 2024, with the IPOs occurring in March and April.
However, Sequoia’s gesture is perhaps more significant in that it indicates that the company is confident in Stripe’s future and its capacity to exit to provide investors with a substantial return. Sequoia stated in its letter to LPs that it was “extremely optimistic” about Stripe’s future and that the company was “durable across economic cycles.”
Remember, Stripe was valued at $95 billion in March 2021, making it one of the highest-valued private businesses in the world. It appeared to be on the brink of a significant, highly anticipated IPO. In January 2023, it was disclosed that Stripe had established a 12-month deadline to either go public or pursue a private market transaction, including a tender offer and a fundraising event.
It selected the latter.
Stripe was valued at $50 billion when it raised $6.5 billion in Series I funding last summer, a significant decrease from its peak of $95 billion. According to TechCrunch, Stripe had executed agreements with investors in February to offer liquidity to current and former employees through a tender offer at a $65 billion valuation. It was still significantly below the high figure, even though it climbed back to that peak valuation.
Stripe remains one of the most highly valued firms in the world despite its valuation of $65 billion.
Sequoia has invested $517 million in Stripe since 2011. Stripe’s most recent 409A valuation was $70 billion, and Sequoia’s entire position is valued at $9.8 billion, the firm stated in its letter to LPs. Sequoia is purported to have distributed $10 billion to its investors in 2023.
This indicates that the fintech colossus will not likely be planning an IPO shortly. Sequoia is returning cash to earlier funds, and Stripe has conducted a significant tender offer. It is also important to note that Sequoia Partner Luciana Lixandru and Kevin Kelly, a partner from Sequoia Heritage, the firm’s distinct wealth management division, both serve on Stripe’s board.
This provides them with exclusive access to Stripe’s financial plans. Michael Moritz departed the Stories VC firm in December, and Lixandru assumed his position on the board.
Stripe may never become publicly traded, of course. Stripe, a 15-year-old company, has maintained an impressive growth despite the heightened competition. Stripe reported in its annual letter in March that it had exceeded the $1 trillion total payment volume metric in 2023, following a 25% increase in its payment volume.
The letter also stated that the company was “robustly cash flow positive in 2023 and expects to be again in 2024.” This implies that it will not feel compelled to raise capital, even as it explores methods to enable its employees and VC investors to sell its shares.