Braintree Is On The Block, Had Acquisition Talks With Square And PayPal

$10 billion in transactions probably turns into about 1% in fees, so we'll say revenue is about $100 million. Being generous, let's say they are running on a 30% margin. That would put profits around $30 million a year.

That's pretty good, but when you look at that number it would be a 10 year payback period at $300 million. At $1 billion, that is a 30 year payback period.

Given the $69 million in outside funding, I'm sure they are pushing for a 10x return, so $690 is probably the ballpark of the asking price. They are probably asking for $1 billion in hopes of a counter around $750 million.

If I were a company looking to acquire a merchant services provider, I would look at the cost of acquiring that $10 billion a year in transaction volume. Is it less than $1 billion? Probably. That is probably why MasterCard built this: https://www.simplify.com/commerce/ instead of dropping $1 billion to buy stripe or Braintree.

If you didn't have a big strategic need, the right price for Braintree is probably more like $200-300 million. Braintree won't sell at that valuation because they have raised too much money and it wouldn't be a big enough return.

I could see PayPal buying Braintree, just for some of the more developer focused company culture, but I don't see why Square would buy them.

My guess is Square and Stripe end up merging at some point. It almost feels inevitable.

I'd rather do business with someone like Balanced, who has a larger product vision than "well paypal sucks".

“Without outside capital, we have to make do with less ... Constraints are a beautiful thing because they force creativity and precision. We don’t have the resources to throw after hit-or-miss hires or strategies. Bootstrapping a business requires a different mentality. It’s taught us to be frugal, hire slowly, and exercise caution as we grew the business. While companies that take funding can do those things, people have a tendency to behave differently when it’s not their money on the line.”

This was about 1 year before they raised a massive round from NEA/Accel. From "Bootstrapped, profitable, and proud" on 37signals blog: http://37signals.com/svn/posts/2800-bootstrapped-profitable-...

I sincerely hope Braintree finds a way to keep its independence and continues standing on its own. We need a degree of competition and fragmentation in all industries so these companies keep up the pace of innovation.

Every time I hear of a company being acquired, it feels like it's only a matter of time before the company is gutted or killed. It seems rare that everyone has their happy ending when it comes to acquisitions.

if paypal acquires them, we'd probably switch to square.

Braintree's business is not worth anything, they are neither innovative nor streamlined nor work as well as Stripe