Paying $115B for Stripe or $77B for Coinbase might be quite rational

CoinDesk reported yesterday that crypto trading startup Coinbase is being valued at $77 billion on private exchanges. And Forbes reported that Stripe is being valued at $115 billion on secondary markets, where private shares can be bought and sold, albeit in a limited fashion.

I instantly wanted to write a piece headlined Beware those super hot secondary market valuations, but after a little digging, I cannot. It turns out that the public markets are so hot, there is historical precedent for seemingly aggressive secondary market transactions being conservative compared to later IPO valuations. And there is further precedent for private market transactions that are more conservative in price terms than venture-determined valuations also working out.

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The hot equities market is making stock pickers out of many startup investors, regardless of whether they are leading priced rounds or buying shares on modern secondary markets.

It's hard to overvalue a startup when the public market is willing to double its valuation the moment it starts to trade.

Let's explore the new prices for Coinbase and Stripe by starting with a look at their dated private valuations, their new, reported secondary prices and where some companies that went public with notable secondary prices wound up trading today.

This will be fun! I promise!

Overprice me, I dare you

Coinbase was last valued by private-market money at around $8 billion, per Crunchbase data back in October of 2018. More recently we've seen secondary transactions that value the firm at $50 billion, other notes concerning a $75 billion possible valuation, and even some enthusiastic chat from a former employee that the company could be worth $100 billion.

Its new $77 billion price tag might seem somewhat pedestrian in that mix, but recall that we're largely discussing the valuations associated with Coinbase set by buyers not in the know; retail secondary buyers of shares in the cryptocurrency exchange are probably not its board members.

So, the public is, to some degree, repricing Coinbase. The question is whether those prices make any sense. Hold your answer, we have more work to do.

Stripe at $115 billion on secondary exchanges is perhaps bonkers, or perhaps nothing more than rationality. In its last round, a $600 million Series G that came in mid-2020, Stripe was valued at around $36 billion. And, it is rumored to be raising capital at a $100 billion valuation.