This article is part of Wellesley Hills Financial’s Market Movements series, found in our weekly newsletter.
Last week, Stripe, the most valuable pre-IPO company in Silicon Valley, provided another liquidity event for its investors. The investment round received over $4 billion in bids, as investors clamored to increase their stake in the $95 billion company. Existing shareholders of Stripe only tendered $1 billion in equity, leaving about $3 billion in investor bids unfulfilled.
The majority of tendered equity was purchased by existing investors. These investors include Capital G, Sequoia Capital, and Silver Lake Equity. However, the new money allowed onto Stripe’s cap table was certainly no stranger to its operations. Shopify, already one of Stripes’ marquee clients, invested $350 million during the round for a 0.4% equity stake.
Shopify makes this investment on the heels of remarks by its Chief Financial Officer, Amy Shapero, during its Q1 earnings call. During the call, Shapero noted, “To further future-proof our offerings and capitalize on our position … we are also stepping up our strategic partnerships. This includes investments in companies and technologies in our ecosystem that align with our mission and whose success at scale could positively impact our merchants.” The CFO’s remarks underline Shopify’s intimate understanding of its place in the ecosystem as the preeminent eCommerce enabler.
Several companies within Shopify’s merchant app store have already achieved unicorn valuations, including Klaviyo, Yotpo, and Signifyd. Luckily for Shopify’s investors, Shopify is aware of the value that they create for their partners and Shopify has already benefited from some of the windfalls they enable. Notably, Shopify struck a deal with Affirm last September, which granted Shopify $200,000 in warrants in exchange for providing Affirm with the exclusive right to offer buy-now-pay-later financing services to Shopify’s merchants. When Affirm IPO’d at the beginning of 2020, Shopify’s stake was worth a cool $2 billion.
Shopify has historically been light on M&A Activity. However, their investments into their ecosystem have paid handsomely thus far. It looks like their investment into Stripe will yield more of the same.