Good morning,

Today, we’ll look at how fintech startups like Stripe and Ramp are seeing their valuations rebound from lows. Plus the top tech news you need to know from this week.

Let’s go 👇

This week’s insight

Context

Stripe is a 14-year-old payments software company that was once valued at $95B in 2021. However, its net revenue growth rate began to plummet to 18% in 2022 and it was revealed to be burning more than $500M in cash that year. This caused its valuation to drop to $50M in 2023.

Ramp, a 5-year-old company that manages corporate expenses with credit cards and software, was once valued at $8B in 2022. Its valuation was cut the following year to around $6B.

Fintechs rebound from lows

For Stripe, since its mega down round; it’s made job cuts, made various tender offers for employees and investors, and doubled down on expanding its product portfolio. 

The startup has now recently generated $615M in free cash flow in the quarter that ended in June. 

It’s also planning a tender offer where it would use its free cash flow to buy up to $50,000 worth of vested shares from each employee as a way to allow employees to regularly cash out some of their shares. 

This puts the startup at a $70B valuation—up from the $50B valuation in 2023. It’s slowly making its way back to its $95B valuation in 2021.

For Ramp, it’s also experiencing hyper-growth with more customers and new products. Earlier this year, it landed $150M in new financing from Khosla Ventures and Founders Fund which rebounded its valuation to just under $8B. 

Some not-so-lucky fintechs 

Many other fintech startups like Brex, Chime, and Plaid have yet to bounce back from their down rounds. Some trades on the secondary market suggest that if they do raise more money through equity, debt, or by going public, they’ll likely do so at lower valuations than their last fundraising.

Brex, a Ramp competitor, last raised money in January 2022 at a $12.3B valuation. In Last December, however, an investor bought $1M worth of shares which implied a new valuation of just $4B.

Chime, a consumer banking startup, last raised money near the peak of the funding boom, reaching a crazy-high valuation of $25B in August 2021. It’s now valued on the secondary market at just $9B.

Plaid, which makes tech that connects apps to bank accounts, raised a Series D in April 2021 that valued it at over $13B. VC firm NEA has now marked its valuation down to $8B, a 38% decrease from the fundraising when it contributed stakes in its portfolio companies to a special investment vehicle called a continuation fund.

Bottomline

These price cuts force investors to take paper losses. But, they can help the startups recruit new workers with more attractive stock packages.

If valuations are reset but the startup has a strong growth narrative, it creates a powerful recruiting advantage. The opportunity to join the company at lower share prices, with greater growth potential, can attract top talent from competitors.

Top news

• CEOs of Meta and Spotify criticize EU AI regulations and warn that excessive control will hinder open-source innovation.

• Shein, the online fast-fashion giant, has filed another lawsuit against its competitor Temu, accusing it of stealing its designs, copying its product images, and engaging in other types of fraud.

• Court documents revealed a list of 95 shareholders of X which includes Sequoia Capital, Larry Ellison, a16z, and even Saudi Arabian Prince Alwaleed Bin Talal.

Other news

• Boston Dynamics’ new robot can do pushups as shown in this 40-second video of its new electric Atlas in action.

• OpenAI is rolling out a feature called fine-tuning, which allows its corporate customers to use their own custom data to train the GPT-4o model.

• Peloton’s revenue stabilizes, having reported a 0.2% increase in revenue to $643.6M for the July quarter, which is the first time since the December quarter of 2021.

• GM announced a $4.4B quarterly profit along with more than 1000 layoffs for salaried employees working on its software services. 

• Uber partners with Cruise to deploy Cruise’s autonomous vehicles onto Uber’s platform.

• Google’s new desktop app, Essentials, which packages a few of its services together like Messages and Photos, will be included with many new Windows laptops.

• SpaceX will send astronauts to a literal radiation belt to test new spacesuits in a mission called Polaris Dawn.

• YouTube is expanding its partnership with Shopify to onboard more brands for its YouTube Shopping affiliate program in a battle to compete with TikTok Shop.

Deal flow

• The founder of failed fintech startup Synapse; Sankaet Pathak, has raised $11M for his new robotics startup Foundation to create advanced humanoid robots that operate in complex environments.

• One-click checkout startup Bolt is in talks to raise $450M at a $14B valuation led by The London Fund.

• Dropbox acquires AI-scheduling tool Reclaim for an undisclosed amount. For context, Reclaim raised more than $9.5M in funding and is used by more than 43,000 companies and over 320,000 people around the world.

• AMD is acquiring server builder ZT Systems for $4.9B to boost its AI and cloud computing capabilities, aiming to challenge Nvidia’s dominance in the AI market.

• Cursor AI raises $60M from a16z, Thrive Capital, OpenAI, and more to revolutionize code generation.

• Walmart sells its entire $3.6B stake in Chinese e-commerce giant JD.com.

Was this forwarded to you?

That’s it for this week. I hope it was insightful. As always, let me know what you think and if you have any questions. Cheers!

🌜 Loryn and Nicole from Dark Mode Digest