As the market downturn begins to hit the sector especially hard, Stripe has taken a huge valuation cut. Sources told the Wall Street Journal that the payments processor's internal value has been cut in half.
The Journal reported that the valuation cut came from a 409A price change, which means that the preferred shares sold in the last round have not been decreased. A more objective pricing is what an internal valuation change is supposed to be. The 409A valuation is still relevant due to the sheer decrease. It is rare for a startup to cut their own valuation outside of a fundraise.
In response to a question about the matter, Stripe refused to speak.
After raising $800 million in fresh funding, Klarna's valuation was slashed by 85% from its last round. Unlike Stripe, the valuation of Klarna was cut by its investors.
Two different signals are provided by the valuation haircuts. At the beginning of the recent market downturn, Fintech companies were seen as an exception because of their strong 2021 fundraising activity. Fears that consumer discretionary spending will fall at the start of a potential economic recession are likely to be particularly harsh for consumer-facing fintechs.
Fidelity cut the valuation of its payment processing company, Stripe, by 9% in March.
The tech industry laid off more people in the first half of the year than any other industry.
When it was announced that it was entering into the identity verification space, it put it in direct competition with one-time partner, Plaid. In addition to enabling other companies to facilitate payments, its competition with newer startup, Finix, also heated up this year as the latter announced it was becoming a payments facilitation company.
The Interchange: Stripe takes a swing at Plaid
fintech companies have been targeted for trying to do too much in a short period of time Corporate spend decacorn Brex recently announced it would no longer work with small and medium businesses.
Growth-stage businesses that boomed during the Pandemic have turned inward to deal with the changing macroeconomic environment. Due to a 409A change, Instacart cut its internal valuation by about 38.5%. Employees may have their equity grants changed as a result of the reported internal valuation cuts.
As Instacart looks to cut its valuation, will it kick off a trend?
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