Stripe’s $95bn valuation shows that Fintech, for all its hype, is real. With Square at $110bn and Paypal at $290bn, “Fintech” companies are now breathing down the neck of, if not eclipsing traditional incumbents like Goldman Sachs with its $120bn market cap.
That a company founded in 2010 can in 11 years be worth more than traditional giants founded in 1869, shows that growth investors can secure investments at wildly discounted prices when viewed from a 5 year perspective. It doesn’t necessarily mean that investors will always get it right – some revenue projections smack of hubris and are ill-judged. But it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. For investors, the upside on the winning companies is wildly unlimited, as the Stripe valuation shows.
Whilst the press were sniping at Softbank for losing money in Greensill and Wirecard, Softbank were turning $3bn into $36bn in the Coupang IPO. Similarly, In 2014, the tech press dismissed Stripe’s $1.75bn valuation as overinflated: “We’d even go so far as to say an exit in the $500 million to $1 billion range is likely. Our argument isn’t that Stripe is worthless. It’s that a $1.75 billion valuation is a high bar given its current state, combined with the competitive landscape.”
What’s evident is that the market for fintech is far larger and far more profitable than many had thought, and when the alternative is a negative yielding government bond, investors can just not get enough of the companies like Stripe that are growing bigger, faster and more capital efficiently than any traditionalist would have previously imagined.