What’s Happening at Stripe?

The darling of Silicon Valley has just secured a new influx of cash. Stripe has raised an impressive $6.5 billion, now valuing the company at $50 billion. This news is noteworthy, especially considering it marks a significant decrease in valuation; just two years ago, Stripe was valued at $95 billion.

Our reaction: 😳

The reason for this drop? A challenging economic landscape. As we continued reading, we found Stripe's press release stating they didn’t need the funds for operational purposes.

Curious, we wondered: What’s the money for?

It turns out, Stripe aims to benefit its employees. Back in 2016, the company began issuing Restricted Stock Units (RSUs) to its workforce. However, these RSUs are set to expire in seven years unless a liquidity event, such as an IPO or acquisition, occurs.

Now that the seven years are up, employees who joined back then risk losing out on stock that could theoretically be worth millions.

To address this, the Stripe board could waive the IPO/acquisition requirement, allowing employees to vest their stock immediately. Seems simple, right?

Not quite. Employees would face hefty tax bills since vested RSUs are taxed as ordinary income. Moreover, because Stripe remains a private company, workers wouldn’t be able to sell their stock to cover these tax expenses. Yikes!

Imagine having $100,000 in stock from seven years ago that now vests at $800,000, while Uncle Sam is demanding taxes on that amount. How can the average employee manage to pay that without liquidating any shares?

This is where the capital raise comes into play. With the new funds, Stripe can assist its employees by either providing loans or repurchasing some of their vested RSUs, helping them manage their tax liabilities.

Patrick Collison, Stripe's CEO, deserves major credit for this initiative. Many companies allow employee stock grants to expire without a second thought.

Collison stated, "Over the last 12 years, current and former Stripes have helped build foundational economic infrastructure for millions of businesses around the world, and this transaction gives them the opportunity to access the value they've helped create."

🥺

Wow, Patty C, is that you channeling Aretha Franklin? Because we’re feeling some serious R-E-S-P-E-C-T.

Section 1.1: Quick Updates

In other news this week:

• Google launched its AI chatbot, Bard, but early impressions have been lackluster. However, we believe Google has long-term strategies in place.
• Microsoft is gearing up to introduce its own app store for games on iOS and Android, aiming to tap into that revenue stream.
• Elon Musk is set to open source Twitter's recommendation algorithm on March 31st, giving us a chance to see what’s behind the curtain.
• Layoffs continue in the tech sector, with Amazon cutting 9,000 jobs across Twitch, cloud services, and advertising after previously laying off 18,000. Meanwhile, Meta has just let go of another 10,000 employees, and rumors suggest that Google is planning additional cuts as well.

Section 1.2: Favorite Discoveries

Here are our top finds this week:

• A guide on how to benchmark your social app.
• Paul Graham’s insights on life's brevity: "If life is short, we should expect its shortness to take us by surprise... Don't wait before climbing that mountain or writing that book."
• A succinct yet impactful post by Morgan Housel discussing the purpose of life and the importance of experiences we can later reflect on with nostalgia.