Why Did Stripe Pay For Bridge 5.5x More Than It Was Worth?

As stablecoins payments go mainstream, Stripe is going all in.

The internet economy FinTech has penned the most expensive deal in crypto to acquire Bridge, a stablecoin payment infrastructure start-up, for $1.1 billion.

The agreement, announced by the CEOs of two companies on Monday, was extremely well received by the community. Despite this, many are puzzled by the eye-popping price tag: Bridge was last valued at $200 million. What is up with all that premium?

With that kind of money in their pockets, crypto insiders suggest, Stripe could have easily bought USDC issuer Circle. Alternatively, if they had been looking to outsource the building of a proper infrastructure for stablecoins payments, they could have spent a more modest amount.

How Do Stripe And Bridge Align?

Stripe is one of the key players in payment processes for the Internet economy.

It offers fiat payment engineering, banking relationships, and licensing solutions to online marketplaces, e-commerce businesses, SaaS enterprises, crypto websites, and others. In 2023, it processed over $1 trillion in transactions.

Their journey with crypto started in 2014 when they offered support for Bitcoin payments. Two years later, the feature was removed due to lack of demand and only reinstated two weeks ago.

Bridge is developing infrastructure to close the gap in the market for converting between fiat and stablecoins. Their motto is, "Local currencies create global problems."

Crypto experts and media were surprised to hear about the acquisition. While the start-up has a stellar customer portfolio and is now at the center of the largest crypto M&A ever, it has mostly gone under the radar for the two-and-half years since it was established.

What's Sequoia Capital's Role In All Of This?

Sequoia Capital is an investor in both Stripe and Bridge.

The VC contributed to Bridge's $58 million funding rounds earlier this year. The firm has been working with the start-up founders Sean Yu and Zach Abrams since 2013, when they launched Evenly, their first company together.

Sequoia Capital is a longstanding Stripe partner. It has invested in the payment company since its first funding round in 2010. Over the years, the VC firm has supported Stripe in all its 15 funding rounds, which have helped it secure $2.2 billion in funding.

With Stripe continuing to hold off going public, Sequoia has become creative in ways to support the company. This July, it contacted earlier Stripe investors, offering to buy up to $861 million of their shares, displaying huge confidence in the company's future.

In their congratulatory letter to the M&A deal, Sequoia Capital said that the "acquisition is a milestone we didn't plan to reach so soon."

Yet, they had already mentioned in an August post how Bridge solutions were in line with Stripe, a subtle signal to investors that their investment in Bridge was worthwhile.

"Each new medium for moving money requires new infrastructure to support it," said Sequoia about Bridge at the time.

The Promise Of Stablecoins And Who Can Do It Better

Ever since Bitcoin ETFs were approved, institutional adoption of crypto has gone through the roof. Many major financial companies, including Visa, Mastercard, JPMorgan, and VanEck, have made some moves towards incorporating the assets.

Stablecoins, with the strongest use case of all crypto, have garnered the most attention. As their joint market cap surpasses $170 billion, the narrative that they can replace fiat currencies in emerging markets becomes stronger. With that, dozens of novel solutions to leverage stablecoins are emerging.

Bridge focuses on providing API for conversions between any two-dollar formats - and issuance as a service, which allows developers to convert any of these dollars into a customizable stablecoin.

In just over a year since launching their APIs, they have onboarded government entities, fintechs, and even SpaceX.

Stripe has been a stronghold of the internet economy for the past decade, and it has the scope and customer portfolio to bring Bridge solutions to online businesses at a large scale.

Time is money, and in this deal, time is everything. With everybody working or already deploying seamless stablecoin payment solutions, the fastest one to do it at the largest scale can have a lead on the market.

Bridge APIs are already operational, and Stripe is ready to embark on crypto. All in or nothing: there goes $1.1 billion.