Stripe’s $1.1 billion deal for Bridge marks a much-needed win for VCs

In March 2022, venture capitalist Chris Ahn was pushing to get into a hot crypto startup that was trying to make it easy for businesses to transact using digital currencies.

The company was Bridge Network. As part of his pitch, Ahn flew to a small town in northern Montana with a term sheet in hand for founders Zach Abrams and Sean Yu, both of whom had previously worked at Coinbase AND Block.

“No one else had flown in to see them in person,” Ahn, who was a partner at Index Ventures at the time, said in an interview Tuesday.

The three hiked together on a snow-melting trail, then chatted over drinks and dinner, as Ahn aimed to convince the founding duo that they should take Index’s money. At the restaurant, he looked to seal the deal.

“I told them I was going to the bathroom and I ran to my car, got the appointment slip and came back,” Ahn said. “It’s hard to put a piece of paper in a jacket without crumpling it, and I didn’t want to give them a crumpled piece of paper, so I left it in the car.

Index brought the investment, entering Bridge’s seed round in 2022. The firm was part of a more recent round, in August this year, that included Sequoia and Ribbit Capital and valued Bridge at about $350 million, according to a person with knowledge of the matter asked not to be named because the assessment was confidential. Also in the deal was Haun Ventures, founded by former Andreessen Horowitz partner Katie Haun.

Ahn left Index to join Haun in 2022. Both his old firm and his new employer have reason to celebrate this week, as Stripe agreed to buy Bridge for $1.1 billion. With this result, Index and Haun are poised to triple their investment within a few months.

A spokesman for Index declined to comment.

It’s a particularly notable exit for venture investors during a prolonged IPO drought, and marks a major win for crypto, which has had few of them despite the troves of money pouring into the industry.

For Stripe, one of the most highly valued tech startups, the acquisition of Bridge will be the largest yet. Bridge said the transaction is still subject to regulatory approvals and other conditions and is expected to close in the coming months.

Bridge describes itself as the crypto bar, specializing in making it easy for businesses to accept stablecoin payments without having to deal directly with digital tokens. Stablecoins are a type of cryptocurrency whose value is tied to the value of a real-world asset such as the US dollar. Customers include Coinbase and SpaceX.

“It’s a sign that Stripe is serious about stablecoins and crypto,” Ahn said. “Payments were the original use case for crypto, and it’s finally here.”

Stripe is paying a big price.

Investors familiar with Bridge’s finances said annual revenue ranges from $10 million to $15 million. At the low end of the range, that’s a multiple of 110 times earnings, and at the high end, it’s a multiple of over 70 earnings.

“The reason Bridge is so valuable is because it’s extremely difficult for a company to use this new stablecoin technology without developer tools that make the technology easy to use,” Ahn said.

Nic Carter of Castle Island Ventures said that while Bridge has rivals in the category, it is the most successful stablecoin infrastructure business in the world, excluding issuers such as Circle and Tether.

“Almost every stablecoin startup we talk to is building on Bridge in some capacity, whether it’s orchestration or issuance,” Carter said. “They are completely ubiquitous.”

Stripe saw its valuation drop from $95 billion in 2021 to $50 billion last year, as private tech companies across the board took a big hit from the recalibration of public markets. Its valuation reportedly rebounded to $70 billion this year as part of a secondary share sale.

Brothers Patrick and John Collison, who founded Stripe in 2010, have deliberately stayed out of the IPO process and have given no indication that an offering is on the near-term horizon. They have a big business, with total payment volume exceeding $1 trillion in 2023.

Given the private market’s demand for the company’s stock, the company has been able to provide some liquidity to early investors and employees in other ways.

“The private markets have been so generous with providing secondary capital and liquidity to shareholders that, if I’m the Collison brothers and I’m sitting around the table, I’m thinking, ‘Why do I want to go public?'” said David Golden, a partner at Revolution Ventures. who has led before JPMorgan Chase’s technology investment banking practice. “Why bother if the private markets are willing to reward you with essentially public market premiums and valuations and let you have secondary sales to keep your employees happy?”

When asked for comment, Stripe referred CNBC to CEO Patrick Collison’s post on X about the deal.

Collison called stablecoins “room-temperature superconductors for financial services” in his post and said Stripe will build the best stablecoin infrastructure in the world.

Bernstein analysts are upbeat about what the deal means for the $160 billion stablecoin market, noting in a report that the acquisition “validates the use and growth of stablecoins as a legitimate use case for public blockchains.”

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