How Investment Banks Are Helping Canva, Stripe, Figma Stay Private

The financial behemoth’s involvement underlined the growing importance of share tenders that let employees and early investors sell their stock to new investors. It’s the kind of deal that once made small ripples for private tech investors but has turned into a tidal wave. And it has big implications for Wall Street. By offering early investors a route to sell their stock, these deals are an important advance for private tech companies who don’t feel a need to quickly go public—or who don’t want to road-test a bumpy market.

At least one other significant deal is likely coming soon, also with Goldman’s involvement. Ten-year-old Figma, which makes design and prototyping software and that saw a deal to sell itself to Adobe for $20 billion fall apart last year, is trying to line up investors to buy hundreds of millions of dollars’ worth of employee and early investor shares at a price that would value the company at about $12 billion, people close to the company said. A Figma spokesperson declined to comment.

“Right now, we’re seeing more companies than ever exploring doing pure, large secondaries, and I do think it’s in part a function of the markets we’ve been in,” said Ryan Nolan, co–global head of software investment banking at Goldman Sachs, who advised Canva.

Investment banks helped arrange several—but not all of—such deals pulled off by a who’s who of large private tech firms  in the past few months, including artificial intelligence firms Databricks and OpenAI, payments darling Stripe, data center startup CoreWeave and software startup Rippling. SpaceX, Elon Musk’s privately held rocket company, built its own software to organize regular share sales by employees.

Canva’s tender brought in a crop of big new investors, including mutual fund Fidelity Management, Singaporean sovereign wealth fund GIC and mega family office Iconiq, as well as Goldman; this investor roster hasn’t been previously reported. Figma is also discussing secondary investment with large mutual funds, people familiar with the matter said.

Such tender offers are one reason investment bankers have fretted that there will be a relatively light volume of tech IPOs this year. That could create an awkward dynamic for the investment banks, which often compete to lead IPOs and can generate tens of millions of dollars in fees from such listings, based on a low single-digit percentage of the capital that companies raise.

Secondary deals yield similar fee charges but are “heavily negotiated,” said Tom Callahan, CEO of Nasdaq Private Market, which runs secondary transactions. Usually only one or two banks work on those deals, however, making them potentially more lucrative than IPOs if companies raise enough cash.

Colin Stewart, global head of technology equity capital markets at Morgan Stanley, which advised CoreWeave on a $642 million secondary sale that was completed in December, said the investment bank views secondary transactions as part of the “life cycle of fees you can earn.”

He continued: “This adds another product to the life cycle. It may elongate the life cycle. But it adds another product.”

‘Tricky Transactions’

Tender offers are nothing new. Marquee tech startups such as Facebook, Uber and Airbnb arranged large employee shares before they went public. When those companies did so, they raised a larger slug of cash for their business. That isn’t the case for Figma, Canva, SpaceX and Stripe.

Those companies don’t need to raise cash, as they have plenty, but they face both employees and existing investors who want to realize gains on some of their valuable stakes. Meanwhile, prospective late-stage tech investors have plenty of money to invest in a shrinking number of companies that are still growing quickly.

“You have these large private companies not pushing toward the public market. They’re large in terms of revenue and in terms of employees. Those employees haven’t had liquidity in the last couple years,” Stewart said.

The best of those companies can still attract significant investment in the private markets, he said. “The capital isn’t infinite, but it’s far larger than you’ve seen over the last couple of decades,” Stewart added.

Such secondary deals are also getting larger because they aren’t just employee share sales; early investors are also looking to return capital to their limited partners. Rippling, for instance, plans to allow two-thirds of the $590 million it raised last month for seed investors to cash out some of their stakes, with the rest going toward employees, a person familiar with the matter said. (The company isn't using a bank to advise on its secondary sale, which attracted mostly existing investors such as Founders Fund and Coatue to put more money in.)

The pickup in deals is also notable in part because secondary sales can be slow moving and difficult to pull off. Companies can’t legally survey employees or investors ahead of securing capital on how much stock they want to sell. Once companies get capital commitments and determine the share sale price, employees and investors have a few weeks to decide how much they want to sell. “These are tricky transactions,” Nolan said.

Both Sides of the Deal

Goldman also could play both sides of the deal. Its asset management group and its private wealth clients invested hundreds of millions of dollars in both Stripe and Canva through Goldman’s growth equity fund and by offering shares in the company to wealthy clients. (Decisions about how much of the share sale to allocate to each investor are “determined by the company” rather than its bankers, Nolan said.)

Darren Cohen, co-head of Goldman’s growth equity team, said the firm avoided investing in late-stage software firms in 2020 and 2021 due to high valuations. But with companies like Canva and Stripe recently raising money at significantly below those peaks, the firm saw it could invest at attractive valuations “calibrated to public names.”

In both Canva and Stripe, Goldman’s investing arm already appears to have made a couple of good bets.

Stripe sold shares to Goldman and other investors at a $50 billion valuation last March, in a fundraising effort that took place when venture capitalists were most afraid to invest and most skeptical of Stripe. After the company’s financial picture improved, investors recently bought more at a $65 billion valuation in another secondary share sale, marking up Goldman’s stake. Canva, recently valued at about $26 billion, set the price of its deal late last year, before public stock prices started to accelerate. Canva’s fundraising round would end up oversubscribed many times over. Both deals included rosters of investors that also typically invest in IPOs.

Cohen said he doesn’t ask executives at these companies when exactly they plan to go public. “We have a long duration. We can be patient investors,” he said.