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PitchBook News - Stripe's pricey share rescue plan

Plus: Diagnosing the healthcare IT funding slowdown, tracking the key bets on emerging tech & more
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The Weekend Pitch
March 5, 2023
Presented by The U.S. National Science Foundation
(Jenna O'Malley/PitchBook News)
In recent weeks, a lot of ink has been spilled criticizing Stripe, a darling of the VC world, for missing its opportunity to go public when the IPO window was wide open.

Despite grabbing a valuation of $95 billion in March 2021—a more than 2.6x step-up from the $36 billion it was worth the year prior—the payments company seemed to be in no hurry to float its stock.

Since most tech stocks dropped dramatically last year, the missed stock market debut would seem in retrospect to be a blessing for Stripe, a company with an enormous customer base and market opportunity. Why spend the first years as a publicly traded entity trying to convince Wall Street that its slowing revenue growth is a function of temporary economic headwinds when it could quietly continue to build as a private company?

But that's not how things are playing out for the payments giant, nor for other highly valued startups that find themselves in a similar bind. The culprit is an obscure tax rule related to restricted stock units like the ones Stripe granted to employees as a part of their compensation packages about seven years ago.

This is the Weekend Pitch, and I'm Marina Temkin. You can reach me at marina.temkin@pitchbook.com or on Twitter @MTemkin.

Some of these early stock awards are expected to start expiring next year unless Stripe goes public, purchases the shares or finds a way to modify the award. With the IPO window shut for now, Stripe is hoping to appease the early RSU holders at risk of losing a chance to cash in on a company they helped build. The company is trying to raise $4 billion in a massive down round, The Information reported, to pay for taxes associated with restructuring the grants.

But Stripe is not alone.
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A message from the U.S. National Science Foundation  
Invention to impact
Relavo, a female-founded team of biomedical engineers from Johns Hopkins University, developed a medical device for people with kidney failure to make home dialysis safer and more accessible. Relavo (NSF-2150910) is one of hundreds of deep tech startups funded annually by the U.S. National Science Foundation (NSF), a government agency that plays a central role in accelerating discoveries into the marketplace.

Each startup can receive up to $2 million to support translational research & development. By investing roughly $200 million in startups annually, NSF helps teams navigate the earliest stages of technology translation. In the past five years, these companies have gone on to raise billions in follow-on capital, and the portfolio has had 300+ exits.

Learn more about NSF funding at seedfund.nsf.gov
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Trivia
Similar to many other verticals, exits in healthcare IT have been limited by the rough economic environment. Across both PE and VC, how many combined exits occurred in the sector in 2022?

A) 59
B) 9
C) 12
D) 48

Find your answer at the bottom of The Weekend Pitch!
 

Healthcare IT's pain points
Healthcare IT
(metamorworks/Shutterstock)
Fundraising in healthcare IT hit some rough waters in Q4 as VC and PE deal counts in the industry dropped sharply.

PitchBook's first-ever Healthcare IT Report lays out the story behind the drop-off—and why innovators in the space shouldn't throw in their towels.
 

Tracking the key bets
on emerging tech in Q4
What are the most successful VC investors betting on for the tech world's next big thing?

The PitchBook Q4 2022 Emerging Tech Indicator is here to help you make sense of it. Tracking more than 100 deals worth more than $3 billion, the indicator has the deals, figures and trends to help you decipher the sector.
 

Going deeper into PE earnings
Public PE firms put out a lot of data. We're here to sort through it for you.

When the major publicly traded firms disclose earnings each quarter, the information tells us about more than just their bottom lines. We can tap this data for insights into how and why those PE firms are growing, with takeaways that can be valuable for other GPs. Find this analysis in our Q4 2022 US Public PE Roundup.
 

Quote/Unquote
(Telnov Oleksii/Shutterstock)
"We call on everyone to meet us at this point and take this issue away from a disease that's stressful and difficult to manage already—to take away the affordability challenges."

—Eli Lilly CEO David A. Ricks in an interview with CNN about his drug company's plan to cap insulin prices at $35.
 

Stay tuned
Keep an eye out for these insights and research reports coming out this week.
  • Q4 2022 Foodtech Report

  • Q4 2022 Enterprise Fintech Report

  • The Most Active VC Cybersecurity Investors List

  • Q4 2022 Clean Energy Tech Report
 

Recommended Reads
The voice that launched a thousand deepfakes: How one viral song led to a music industry reckoning. [The Information]

Putin's secret weapon on energy: an ex-Morgan Stanley banker. [The Wall Street Journal]

What does workplace TikTok look like during layoffs? It gets weird. [The New York Times]
 

Trivia
Answer: D)

In 2022, between PE and VC, there were 48 exits, less than half of 2021's total of 102. Learn more in our debut Healthcare IT Report.

This edition of The Weekend Pitch was written by Marina Temkin, Emily Burleson, Rosie Bradbury and Jacob Robbins. It was edited by James Thorne, Clarinda Simpson and Ron Prichard.

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Key phrases

healthcare IT funding slowdown The Weekend Pitch enormous customer base slowing revenue growth temporary economic headwinds obscure tax rule most tech stocks restricted stock units early stock awards stock market debut

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