Varo, Stripe said to be raising new funds at much lower valuations

With the market changing so dramatically in 2022, it’s no surprise that many startups are now thought to be raising rounds.

Just this week, it was reported that Varo is raising a $50 million equity round led by Warburg Pincus at a “significantly” reduced valuation. According to Fintech Business Weekly, the struggling neobank will raise funding at a pre-money valuation of $1.8 billion. That’s down from the $2.5 billion it valued Varo in September 2021 when it raised a massive and “oversubscribed” $510 million Series E.

The startup celebrated the two-year anniversary of receiving its national bank charter last August — a move that made it the first all-digital nationally chartered U.S. consumer bank. In an interview with TechCrunch, CEO and founder Colin Walsh insisted last September that the company is “still seeing strong customer growth” and has a “clear path to profitability.”

TechCrunch reached out to inquire about whether Varo had in fact signed a term sheet for the new $50 million raise — $25 million with Warburg Pincus — but the company declined to comment.

Also this week, The Information reported that payments giant Stripe is still trying to raise capital and is now believed to be valued at about $50 billion, or $20 per share, after clearing certain hurdles. Targeting. Earlier this year, TechCrunch reported that Thrive Capital had committed $1 billion in fresh capital to Stripe as part of a new round of investments that valued the fintech company at between $55 billion and $60 billion. will be between

Initially, it was thought that Stripe was looking to raise $2 billion, but the number is now believed to be closer to $2.5 billion to $3 billion, according to reports from The New York Times and The Information. In an unusual twist, Stripe is believed to be raising new funds, as The Information reported, “to address the issue of expiring restricted stock units for some of its veteran employees. Do — and a bigger employee tax bill that will likely come with it.”

Recently publicly valued at $95 billion, Stripe has not been immune to the global downturn. In November, it laid off 14 percent of its staff, or about 1,120 people. And the company had already written down its intrinsic value more than once over the past year. Earlier this year, TechCrunch reported that Stripe had increased its internal valuation to $63 billion. The 11% cut followed internal cost cuts six months ago, which valued the company at $74 billion.

The fact that Stripe could raise money to pay the tax bill raised eyebrows internally at TechCrunch. That’s not common, and it certainly doesn’t seem like an ideal way to spend investor cash. Ken Smith, founder and CEO of Next Round Capital Partners – a capital markets and VC secondaries firm – echoed our sentiment.

In a phone interview on Jan. 27, he told me that “it’s very unusual for investors to be excited about a new era that’s going to be basically free taxes.”

Either way, the fact that fintech startups – or any startups for that matter – are raising rounds isn’t the big news it might have been a year ago. When faced with either closing or raising a down round, most startups choose the latter.

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