Stripe, a privately held payments processor whose valuation recently doubled, is emblematic of how heated the venture capital market has become.
It was one of 55 U.S. companies that each raised $100 million or more in funding rounds held in the third quarter. Six companies broke the $500 million investment mark.
Largely as a result, overall venture funding rose 17% from the second quarter and 33% year over year to $27.5 billion, according to an analysis from PwC and CB Insights. There were 1,229 deals in the third quarter.
“This quarter approached quarterly funding records,” Tom Ciccolella, partner and U.S. venture capital leader at PwC, said in the report.
Stripe’s value skyrocketed to $20 billion from a previously reported $9 billion after closing on its funding round. The San Francisco firm had one of the highest valuations among U.S.-based unicorn companies at Sept. 30.
Other emerging companies serving banking and wealth management also closed on millions in funding during the quarter, including the machine-learning-driven
As for what’s driving interest in Stripe, the 8-year-old company has quickly established itself as a proficient brand with online merchants, especially as it expands beyond payments processing.
“Stripe's valuation highlights that investors still see a lot of growth ahead for the firm's developer-friendly, open API approach,” said Arieh Levi, analyst at CB Insights. “Also, as e-commerce continues to boom, Stripe has been aggressive in adding new features, while expanding its growth internationally.”
E-commerce could amount to $5.8 trillion globally by 2022, up 107% from $2.8 trillion in 2018, according to an analysis from 451 Research in New York.
“There’s a lot of volume at stake here,” said Jordan McKee, research director for customer experience and commerce at 451 Research.
McKee points to a few reasons why Stripe courts favor with investment companies.
One of Stripe’s recent efforts to expand its customer base includes a push to work with enterprise companies such as Salesforce after being associated with startups and small developers throughout the company’s history.
Stripe works with Amazon, Allianz, Slack, the National Football League and Zillow, and recently welcomed Google, Spotify and Uber as customers.
“They’re putting a lot more emphasis on courting those larger customers,” McKee said.
He also noted Stripe expanded its product line to make itself more than just a payments processor for online merchants.
Stripe in the last three months alone has launched a credit card-issuing product and a new mobile point-of-sale device meant for online businesses seeking to capture sales in brick-and-mortar locations, pop-up shops, or for special events like concerts.
Warby Parker, an online retailer that specializes in prescription glasses, is one of the first major brands to use the Stripe Terminal, at its 80 locations across Canada and the U.S.
McKee also pointed to opportunities outside the U.S. that Stripe with undoubtedly pursue.
“They are definitely eager to gain market share,” he said. “Competition is helping to drive that, but I also think they want to be viewed as more than just a payments processor.”
PwC and CB Insights also examined global trends in funding as venture capital companies invested $53.1 billion in the third quarter, up 2% from $52.2 billion in the second quarter. The third-quarter figure is up 13% from the year-earlier period.
The report attributed the slight increase to Asia, where funding dropped 11% to $19 billion from $21.8 billion the previous quarter. Asian deal activity also was a tick above the second quarter's: 1,359 deals versus 1,353.
