Q: Why is Stripe waiting so long to IPO?
Stripe will IPO. It’s just not in a rush.
Why do private companies and startups IPO, anyway? There are 5 basic reasons:
- Raise capital. But Stripe can raise all the capital it needs pre-IPO. So no need to IPO just for working capital.
- A currency for M&A. At some point this will help Stripe, to be public to make mega-acquisitions. But right now, it can and has funded acquisitions with stock and cash.
- Liquidity for employees. There is enough liquidity Stripe can cash out employees now. Secondary transactions that provide employees partial liquidity is pretty common in late-stage startups now, at least the ones with far more investor demand than supply.
- Liquidity for investors. There is enough liquidity Stripe can cash out early investors now, if they want to cash out.
- More credibility, especially with enterprise customers. It’s not clear this much matters from companies with big brands like Stripe. But in the enterprise, vendors that are public tend to be seen as more stable by larger buyers.
These are great benefits for many private companies. But Stripe already has the first 4 of the 5 benefits.
So for now, Stripe gets no direct benefit from an IPO (or direct listing).
But the time will come. Right now, Stripe can focus 100% on top-line growth and investment in its product and team without the distractions of having to show bottom-line improvements each quarter. Post-IPO, profitability or at least a path to profitability will matter much more. Losses will need to narrow at first, and then cross over to true profitability.
Better to invest even more in growth now, if you don’t need to IPO right now.
And yes, Stripe will still IPO / direct list. Just later.