How Stripe’s $1.1 Billion Crypto Bet Could Pay Off
The Takeaway
• Bridge customers include Scale AI processor Airtm
• Payments giants are embracing stablecoins for moving money globally
• Bridge was valued at $100 million in a late 2023 funding round
Crypto fans have argued for years that blockchain technology could speed up global payments and make them cheaper. Now payments giant Stripe is making a more than $1 billion bet on that finally becoming a reality—and the crypto industry is rejoicing.
Stripe announced on Monday that it had agreed to acquire Bridge, a two-and-a-half-year-old San Francisco–based startup focused on payments using stablecoins, a type of crypto pegged to a traditional currency. With estimated annual revenue of around $12 million, based on its transaction volume and people with knowledge of its fee structure, Bridge is fetching an eye-popping multiple of around 90 times revenue.
Bridge helps companies convert dollars or euros into blockchain-based stablecoins and use those stablecoins to pay their workers or suppliers overseas. It pitches its services as an improvement for companies over traditional forms of international payments, which involve sending money through correspondent banks that communicate via the Swift network.
Its customers include Airtm, a payment processor that works with fast-growing data-labeling startup Scale AI, underlying how some businesses are starting to embrace crypto.
The deal values Bridge at $1.1 billion and if completed would be the largest-ever crypto acquisition. Bridge, which makes money by charging fees based on transaction volumes, said in August its annualized payments volume had reached $5 billion. It charges 0.1% to 0.25%, according to people at firms that have been quoted on prices, which means its revenue at the high end would be about $12.5 million.
The sale is a remarkable outcome for Bridge, which was valued at about $100 million in a late 2023 Series A, according to people familiar with the figure. Bridge has raised a total of around $58 million from investors including Ribbit Capital, Index Ventures and Sequoia Capital, also a major Stripe investor.
The hefty price tag could be worth it for Stripe, which was recently valued at $70 billion in an employee tender. The company has been trying to find more ways to expand its payments business by using crypto to add speedy payments and quickly sign up customers around the globe.
Stablecoins have been a hot area of focus for crypto companies as well as traditional payment firms over the past year. Compared to using bitcoin, which is notoriously volatile in value, stablecoins have a set value, making them easier to use for payments purposes. And business customers may be easier to pitch than consumers—merchants might save money by accepting payments in crypto rather than credit cards, for example.
More acquisitions in the stablecoin sector could be coming. Bhanu Kohli, CEO and co-founder of Layer2 Financial, recently renamed Rail, which provides services similar to Bridge’s, said his firm has received acquisition interests from payment companies and crypto firms, though he has no plan to sell.
Bridge’s roughly 45-person team, including co-founders Zach Abrams and Sean Yu, is expected to join Stripe once the deal is completed, people familiar with the deal said. Abrams was previously chief product officer at small business banking startup Brex and head of consumer product at crypto exchange Coinbase. He and Yu, a former engineer at Coinbase and Airbnb, previously co-founded Evenly, a Venmo competitor, and sold it to Square in 2013.
“This is definitely a premium company in terms of the talent and the growth they are experiencing,” said Haun Ventures partner Chris Ahn.
Still, Bridge relies heavily on the traditional financial system to operate. Bridge receives dollars from the companies it works with via its U.S. bank account, and uses those funds to buy stablecoins from Circle and Tether. Those companies issue the stablecoins and manage the cash and other reserves that back them up.
Bridge then sends the stablecoins to contractors and suppliers on behalf of the companies it works with. But those recipients still need to cash out stablecoins into local currencies, so Bridge partners with a network of local crypto services such as Bitso in Mexico and Yellow Card in Africa.
For example, Scale AI gives overseas contractors workers the option to get paid in stablecoins. Scale AI’s payment processor, Airtm, in turn uses Bridge behind the scenes to enable stablecoin payments. Scale first funds its account with Airtm by wiring U.S. dollars to Bridge’s bank account. From there, Bridge uses the funds to buy stablecoins, and then sends them to contractors’ crypto wallets via Airtm.
While that process might sound convoluted, stablecoin proponents say it is still a cheaper and faster way than traditional payment methods for companies to make cross-border payments. It also allows companies to quickly send payments to users that don’t have their own bank accounts, as well as people in countries such as Pakistan where big payment companies like PayPay don’t operate.
Rubén Galindo Steckel, founder and CEO of Airtm, said AI contractors are the service’s fastest-growing segment. “Airtm can allow someone who works for Scale AI to cash out their money into their local currency in six minutes,” with the recipient paying fees of about 2.5%, he said.
Creators and streamers on social sites who are based overseas and don’t have bank accounts can also use stablecoins to receive payouts, Steckel said.
Crypto U-Turn
The deal to acquire Bridge comes after Stripe made an about-face on using crypto for payments in recent months. Stripe had stopped supporting bitcoin payments in 2018, blaming high costs, slow transaction times and the difficulty of using volatile bitcoin as a payment method.
In April, Stripe’s co-founder and president, John Collison, unveiled a feature that allows merchants using Stripe-powered checkouts to accept stablecoins. At the time, Stripe had already been working with Paxos, a rival stablecoin startup, to provide stablecoin services, according to a person familiar with the relationship.
Bridge had also been pursuing Stripe as a potential customer in recent months, and those conversations evolved into deal talks, according to one person familiar with the conversation. Bridge provides the same functionality as Paxos. It’s unclear whether Stripe’s work with Paxos, which was valued at $2.4 billion in 2021, will continue once the Bridge deal closes.
Stripe and Paxos declined to comment.
Embracing stablecoins for payments comes with some risks for Stripe. Stablecoins are not yet a legal form of money in the U.S., meaning they are subject to limited federal oversight and consumer protections. And U.S. lawmakers have struggled to make progress on legislation to provide a regulatory framework for stablecoins, creating uncertainty that could give some companies pause about adoption.
Stripe’s crypto initiatives have also made at least one of its major banking partners uneasy in the past. Wells Fargo, which formerly powered Stripe’s credit card payments, raised concerns about Stripe’s efforts to expand crypto payments. Wells Fargo wound up cutting ties with Stripe and other payment firms entirely. It was part of a broader retrenchment of banks from working with payments companies and other fintechs amid mounting regulatory scrutiny.