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, who had both previously worked at Coinbase and Block.
“Nobody else had flown out to see them in person,” Ahn, who was a partner at Index Ventures at the time, recounted in an interview on Tuesday.
The three of them hiked together on a path with melting snow, and then conversed 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 over to my car, grabbed the term sheet and came back,” Ahn said. “It’s hard to fit a piece of paper in a jacket without crumbling it, and I didn’t want to give them a crumpled piece of paper, so I left it in the car.”
Index landed the investment, getting into Bridge’s seed round in 2022. The firm was part of a more recent round, in August of this year, that included Sequoia and Ribbit Capital and valued Bridge at about $350 million, according to a person with knowledge of the matter who asked not to be named because the valuation 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, after Stripe agreed to buy Bridge for $1.1 billion. With that outcome, Index and Haun are poised to triple their investment in a matter of months.
An Index spokesperson declined to comment.
It’s a particularly notable exit for venture investors during an extended IPO drought, and marks a big win for crypto, which has had few of them despite bundles of cash pouring into the industry.
For Stripe, one of the most richly valued tech startups, the Bridge purchase will be its largest to date. Bridge said the transaction is still subject to regulatory approvals and other conditions and is expected to close in the coming months.
‘Serious about stablecoin’
Bridge describes itself as the Stripe of crypto, specializing in making it easier for businesses to accept stablecoin payments without having to directly deal in digital tokens. Stablecoins are a type of cryptocurrency whose value is pegged to the value of a real-world asset like the U.S. 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 hefty premium.
Investors familiar with Bridge’s financials said annual revenue is in the range of $10 million to $15 million. At the low end of the range, that’s a multiple of 110 times revenue, and at the high end, it’s a revenue multiple of over 70.
“The reason why Bridge is so valuable is because it’s prohibitively difficult for a company to use this new stablecoin tech without developer tools that makes the tech easy to use,” said Ahn.
Nic Carter of Castle Island Ventures said that while Bridge has rivals in the category, it’s the most successful stablecoin infrastructure business in the world, excluding the issuers like Circle and Tether.
“Almost every stablecoin startup we talk to is building on Bridge in some capacity whether it’s orchestration or issuance,” said Carter. “They are totally ubiquitous.”
Stripe saw its valuation plummet from $95 billion in 2021 to $50 billion last year, as private tech companies across the board took a major hit from the recalibration of the 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 intentionally steered clear of the IPO process and have given no indication that an offering is on the near-term horizon. They’ve got a big business, with total payment volume surpassing $1 trillion in 2023.
Given private market demand for the company’s stock, the company has been able to offer some liquidity to early investors and employees in other ways.
“The private markets have been so generous with providing capital and secondary 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 previously led JPMorgan Chase’s tech investment banking practice. “Why bother if the private markets are willing to reward you with basically public market premiums and valuations and let you have secondary sales to keep your employees happy?”
When asked to 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 that Stripe is going to build the world’s best stablecoin infrastructure.
Bernstein analysts are bullish on what the deal means for the $160 billion U.S. dollar-pegged stablecoin market, noting in a report that the acquisition “validates the usage and growth of stablecoins as a legit use case for public blockchains.”
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