The growth and expansion of Stripe has been so fast that it would take your breath away. In the span of 10 years, Stripe has acquired nine organizations as part of their expansion plan. Their most recent acquisition was Paystack, an African Fintech company, which was acquired for $200 million in October 2020. In total, Crunchbase reports that Stripe has invested in 31 companies to date, been through 15 funding rounds and has 13 lead investors. It came as no surprise when The Wall Street Journal reported Stripe was now valued at $95 billion, after their latest funding round raised $600 million. Although, i would love to understand how they came to that valuation.
In comparison, PayPal which is a household name globally, has a current market capitalisation of $304 billion, which is 141% higher than their market capitalisation in 2019. PayPal has historically restricted some African countries from receiving payments on their platform. They recently confirmed a partnership with Flutterwave, another Fintech company in Africa. Through this partnership agreement, African businesses can now send and receive money via Flutterwave's PayPal integration. It should also be noted that PayPal has acquired 21 companies to date and none of them are from Africa.
When it comes to business expansion strategies such as acquisitions and partnerships, it is always a question of risk versus reward. PayPal's partnership agreement with Flutterwave will not exactly increase their customer base in Africa substantially, but it will generate a small revenue stream from the partnership agreement. Flutterwave, on the other hand, comes out on top in this partnership with PayPal. They now offer a stronger value proposition to their existing customer base and will potentially get a portion of PayPal's existing customer base in Africa. That will obviously be a bummer for PayPal.
Historically, large organisations have acquired smaller organisations in emerging and uncertain markets to reduce their exposure risk. To put it quaintly, larger organisations use smaller startups as guinea pigs to test uncertain and emerging markets before acquiring them. This is considered a shrewd expansion strategy because the big organisations don't take on any financial risks or resource requirements, to launch a new business in an uncertain market. They sit back and wait, till market demand and returns are proven, then they acquire the startup, who did all the leg work.
Microsoft is a great example of a company that expanded through acquisitions. Since Microsoft's IPO on March 13, 1986, they have subsequently acquired 235 other companies. Some big names are Skype, GitHub and Linkedin.
Stripe's acquisition of Paystack for $200 million has sent a clear message globally, that Africa has a sustainable Fintech market. That said, it also puts alot of pressure on Paystack to perform. The success or failure of Paystack will definitely set a precedent in the African Fintech market, so we are all rooting for Paystack to succeed.
As for PayPal's partnership with Flutterwave, i won't hold my breath. If PayPal's expansion plans in Africa weren't risk averse, they would easily dominate the African market with their brand. For some reason PayPal are being cautious with their expansion plans in Africa, and are instead looking for partnerships rather than acquisitions. In a way, that bodes well for Africa, because we want competition to drive prices down and deliver better value for end users.
PayPal is a big fintech player, why are they hesitant to acquire businesses in Africa, or invest in equity in other African Fintech startups? Stripe took the risk on Paystack, why can't PayPal do the same? Their expansion strategy in Africa is based around partnerships but shrouded in risk aversion. I dare say they still are not fully convinced about the sustainability of the African Fintech market. Sometimes you've just got to take a leap of faith. If you don't, someone else will, at least Stripe as shown that.