This is The TechCrunch Exchange, a newsletter distributed on Saturdays, stemming from the column of the same title. You can subscribe to the email version here.

Greetings, and welcome to a special Thanksgiving installment of The Exchange. We’ll keep today’s discussion concise. However, there’s still plenty to consider.

First, The Exchange previously analyzed the Slack-Salesforce agreement, so please review that if you didn’t have a chance while enjoying breakfast pastries yesterday. Additionally, the reasons behind Palantir’s recent surge in value remain unclear. We would typically examine this, considering what its gains might indicate for smaller, privately held SaaS businesses. But given that its performance in the public market seems to be an artificial increase in value, we will simply observe the situation.

I’d like to focus on this today: a Bloomberg report indicating that Stripe is seeking additional funding, potentially at a valuation “exceeding $70 billion or even reaching as high as $100 billion.”

That’s quite a figure. At those valuations, Stripe would rank as either the most or second most valuable startup globally, depending on the criteria used. While “startup” feels unusual for a company of that magnitude, Stripe’s continued presence in the private markets, its ongoing fundraising efforts, and its apparent prioritization of expansion over immediate profits align with the characteristics of a tech startup, so the label remains appropriate.

This is somewhat surprising, considering Stripe’s substantial size and potential twelve-figure valuation, assuming it achieves the $100 billion mark. It’s difficult to identify a compelling reason for its continued privacy beyond its ability to maintain that status.

Regardless, are these reported, potential valuations unrealistic? Perhaps. However, there is a logical basis for them. Remember that recent earnings reports from Square and PayPal demonstrated robust payments processing volumes, which is a positive indicator for Stripe’s own recent growth. It’s also worth noting that just over a year ago, Stripe was already handling “hundreds of billions of dollars in transactions annually.”

We can perform some calculations here. If Stripe processed $200 billion in transactions last September and $400 billion currently, treating this as an annualized figure, and assuming a transaction fee of 2.9% plus $0.30, which we’ll simplify to 3% for conservatism, that equates to an annual revenue run rate of $12 billion.

Of course, the company’s actual figures could be closer to $100 billion, $150 billion, and $4.5 billion, respectively. And Stripe’s gross margins won’t necessarily mirror those of Slack.

However, this illustrates why Stripe’s rumored new valuations aren’t entirely unfounded. If you believe in the company’s growth trajectory, the numbers can be justified. Supporting this argument are its publicly traded competitors. Square’s stock has more than tripled in value this year. PayPal’s value has more than doubled. Adyen’s shares have nearly doubled. This positive momentum in the public markets can significantly benefit a late-stage startup seeking new capital and a favorable valuation.

In conclusion, Stripe’s potential new valuation appears plausible. The fact that it remains a private entity, however, is less easily explained.

Market Notes

• Sesh, a company concentrating on mental wellness solutions, secured funding this week led by Polaris Partners. We’ve recently covered this area, making this investment particularly noteworthy.
• We’re highlighting three additional companies that have surpassed $100 million in annual recurring revenue, and also extending an invitation to startups currently achieving $50 million ARR to connect.
• The recent developments at Coinbase are certainly raising questions.
• Tiger Global’s investment in Unacademy is also drawing attention. This is largely due to the significant growth currently being experienced in the edtech sector in 2020, a notable shift considering its comparatively slower pace just last year.

Various and Sundry

Regarding educational technology, Equity’s Natasha Mascarenhas and our dedicated producer Chris Gates collaborated on a focused episode examining the education technology sector. The episode is available for listening here and is highly recommended.

Best wishes, and may we both prioritize some physical exercise,

Alex