The Empire Stripes Back

A $100B Bet on Two Brothers

When we think of the things that shape who we are, a first kiss may spring to mind, or perhaps the first time you told someone you love them. Tender feelings, passionate emotions, all that garbage. These core memories alter how we perceive life around us and shape our worldview. 

I have one moment that held equal import as that first, braces-filled, teenage kiss. It was the first time I was offered a chance to buy Uber stock in 2016. 

At this point in Uber’s history, the company was flying high, growing faster than any startup in history, and it seemed like nothing could stop them. Everyone was dying to get their hands on some shares. A banker approached the fund I was working with, with the chance to invest in an Uber SPV at the same valuation as the Saudis’ price—roughly $62B. This was exciting! However, there was one teensy weensy detail that made me pause: I wouldn’t have entry to a data room, there would be no communication with management, and I wouldn’t even get access to an income statement. The banker was looking to raise $100M based on a logo alone.

I love this story because, to my knowledge, that money was raised within a month. It shaped my opinion that there is always a dummy with more money than you. FOMO is no respecter of income brackets. 

About two years ago, I sensed a similar stirring in Silicon Valley. Like dogs in heat, investors were increasingly lusting after and losing their minds for one company: Stripe. For the uninitiated, Stripe is a payment processor valued at their last fundraise at ~$95B. The company started with the task of helping companies accept online payments and has now expanded into numerous areas. 

Up until now, newsletters writing about the company have had to rely mostly on fawning praise to evaluate the company. (On a side note, it is remarkable how literally every single one of my peers has published a glowing analysis of the company). Well now, for the first time, Stripe released a few public performance stats in their annual letter last year. We can move past hyperbole to a little cold, hard Napkin Math™. 

On the secondary markets, Stripe stock has been offered for upwards of a $140B valuation while the company was doing $640B in payments processing. Meanwhile, its closest peer Adyen processed $610B in payments, and is currently valued on the public markets at roughly ~$50B. This is at least a $50B discrepancy. This is crazy! Some of it is definitely driven by private investment funds having too much capital and too few places to put it (again, FOMO is no respecter of income brackets) but I think there is something more. 

This discussion matters not just because Stripe is fun to ponder, but because the phenomena of valuation discrepancies between private and public markets are incredibly stark right now.

Learn more

This post is for
paying subscribers

Subscribe →

Or, login.

Read this next:

Napkin Math

How Costco Convinces Brands to Cannibalize Themselves

An unlikely marriage where both sides win

156 Jul 15, 2020 by Adam Keesling

Napkin Math

You Probably Shouldn’t Work at a Startup

It’s overrated—both financially and emotionally

172 May 20, 2021 by Evan Armstrong

Napkin Math

Product-Led Growth’s Failure

How a Scrappy Utah Software Company Ignored Every Silicon Valley Heuristic and Won Anyway

141 Jun 3, 2021 by Evan Armstrong

Superorganizers

The Neuroscience of Achieving Your Goals

We turned a Huberman Lab Podcast Episode into an essay

53 May 14, 2022 by Lewis Kallow

Divinations

Why Sh*t is Hitting the Fan

How the Fed accidentally scuttled your Series B, simply explained

33 🔒 May 12, 2022 by Nathan Baschez

Thanks for reading Every!

Sign up for our daily email featuring the most interesting thinking (and thinkers) in tech.

Subscribe

Already a subscriber? Login