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Stripe Is Now a $20B Company (bloomberg.com)
563 points by jonknee 7 months ago | hide | past | web | favorite | 167 comments

Stripe's awesome. I'm in YC's startup school and used Stripe Atlas to incorporate. I got an email from Stripe, sharing an opportunity to post your landing page and get feedback from Stripe's design team. That Friday I got an awesome teardown from Stripe's design team. The page (https://nanagram.co) still has quite a ways to go, but I incorporated most of their feedback and I'm super happy with it. Another cool thing — Through the grapevine I found out Patrick mentioned NanaGram at an all-hands meeting. I sent him a quick email to say thanks for the mention, not expecting a reply whatsoever, and within a few hours he responded. Stripe's kind of mind-blowing in their ability to not only build a great product but also to serve the community and be human.

One minor nitpick - just tried to sign up, and if I was a USA user, then your page would have unhidden the pricing buttons. but as I was UK user, it did not unhide anything (not even a sorry!). As such i was left with the default waitlist boxes, and was confused as to whether I was signing up or not.

(it's possible it did unhide the sorry, but it was not clear on the smaller screen... maybe a splash of colour? Perhaps "Sorry based on your selections above we don't yet offer the service in your country - sign up below for notifications." You kind of do say that but like I said confused)

Anyway it looks a great service, and I am now on the wait list

Thanks so much for your feedback. I just deployed the new US-to-international plans earlier today and haven't had a chance to user test it yet. That experience is totally not the best right now. I'm working on a full-on international release. I'll be reaching out to you to try and convince you to do a user study in exchange for free photos and aim to release mid-late next week.

of course, happy to

That's great on Stripe, but tbh your product is awesome. If I was an angel investor, I'd happily put money into this and recommend you to my family. Keep up the great work!

This is very nice of you. I'm due to visit my 94-year-old grandma tomorrow and will be printing this out and showing it to her. Cheers.

I love Stripe as well, but one thing keeps me wondering - why do their bank payouts take so long?

My company is based in Norway, and I see funds arriving a week after they are marked "on the way to your bank". Money get sent like that every day, but arrive only after a week from a local bank. I know that local bank transfers are reconciled multiple times a day, and I can't see why there is a delay.

The money sending frequency setting seems just misleading to me.

Doing transfers from France to Japan often, regular banks are scandalously slow and the slowness of their transfers prevents a lot of international possibilities IMO. I started accepting bitcoins as an alternate payment method.

US banks (maybe most banks?) are just slow as hell from my experience. I pay several bills here in the USA from US banks to US banks / credit card companies and it takes a week for it to fully sync up on both my person bank account and on the statement balance. But if I were to pay with a debit card I would see the transaction instantly, though in such case it would say pending for days and days.

In some countries domestic bank to bank payments are instant and either free or very cheap. South Korea where I am is one. Bank transfers take perhaps one second. International bank-to-bank payments are more of a hassle. There is no Stripe in Korea yet, though they seem to have success in Japan, the land of cash-only.

How long did the Atlas setup took you? Few weeks? Update: Just saw your landing page. Pretty cool concept :)

I used them a few months ago, before startup school. I can't remember the turnaround time as I had a wedding on the horizon and that time is a blur, but I remember it being reasonable and delightful. It's totally worth the price. Doing paperwork is the last thing I want to be doing. On my last startup I must've filed for tax extensions for almost 10 years in a row. I love Stripe for removing all of those headaches.

Ah makes sense. I just signed up with them. So wondering how long it may take me. Did you also get the SV bank account through them?

I tried finding a confirmation / "you're done" email from them but can't find it, so I'm not sure how long it took. I did end up getting the SV bank hooked up but haven't moved everything over there yet.

Are MMS generally high resolution enough for printing? Don't they get squished to something like 300kb?

That was one of the initial things I was unsure of back when this was more of a side project. I sent the first batch of images from my siblings to print locally, unsure how they'd look. Surprisingly they looked pretty awesome even though the resolution of the images seemed low. They're not pro-quality, wedding photos but they are solid and solve the problem for the audience (old people). Carriers have a tendency to downsize images too far, especially if you send 5 or 10 images at once. When this happens, our bot complains at you. The limits of MMS can be a bit annoying so I recently rolled out email support. This also allows us to support enlargements which we can't do with MMS. Still, having a unique number is sweet because SMS is the first option when sharing a photo (on iOS, at least) and it's easy to snap a photo, send it to NanaGram, and close your display without getting sucked into the notifications abyss.

The thing I love most about Stripe is that they have invested quite a lot of resources in their Atlas program to help people from around the world get a level playing field.

Before Stripe Atlas there was not a single resource that would allow a non American to setup a bank account for their company totally virtually without ever visiting US (i know because I spoke to at least a dozen of different people and everyone agreed that while they could open a company for me, opening a bank account was impossible after the patriot law (?) yet somehow Stripe managed to do it).

So not only they have made great accomplishments in the dev part with their amazing API they have also made a huge difference in many other aspects too that only a few know about.

My startup went through Atlas a couple years ago when it was in beta, and it was amazing. It let us focus on actually building the business rather than screwing around with generic corporate structure and banking, and the team seemed to be fully invested in removing as much legal noise from starting companies as they possibly could. Any problems we had they were there with us to make them disappear.

John Collison apparently said the goal of Atlas was to have an impact on access to entrepreneurship that would be visible in macroeconomic indicators, and the team seemed to really be putting in the work to reduce barriers to entrepreneurship and make that happen.

And all of it for $500, and they gave us like $5k in AWS credits. It was such a good deal that it didn't even make sense, which I assumed was because it was in beta, but it doesn't even look like it has changed.

It's the classic "grow the pie" strategy - if you create more customers that feed into using your service, it's worth it even if you're running a modest loss.

Think of it as a marketing or business development strategy, rather than a service of its own.

And such a great business development strategy at that. It's a win/win for everyone involved. Other online payment providers didn't have the foresight to create Atlas, and it's a testament to Stripe's brainpower that they had this idea and pulled it off so well.

I just noticed that their vision is to "build the economic infrastructure for the internet." That's ambitious. I wouldn't have guessed, from that vision, that they'd build Atlas. But in hindsight, it makes a lot of sense.

"Do things that don't scale"[1] references Stripe specifically for actively recruiting users, but your description of the Atlas program makes it sound like an extension of that strategy. Whereas launching in a single tiny overseas market probably didn't look like it had favorable numbers in absolute terms, they probably got better at opening new markets after each success, and an ever-increasing portfolio would made it increasingly difficult for competitors to imagine ever catching up.

[1] http://paulgraham.com/ds.html

In addition to focusing on international, they are still focused on very small companies. I went to a conference for small solo entrepreneurs this year, and they had a heavy presence. They also acquired/supported indie hackers. Now that they are giant, it would be so easy for them to write off the small customer, but they continue outreach. Its strange that I have such positive feelings about a payment processor, because payment processing isn't a major issue for our business, but they have just been good to do business with compared to the 3 other processors I had before, and that makes me like them.

Stripe are just awesome. Thing I love most about them were the capture the flag comps they did. Seriously. So much love for those games.

How did Stripe bypass the law here?

They didn't. It was all stuff that was technically legal, but required founders to hire a US lawyer to handle the paperwork for them and to make lots of micro-decisions about a legal system with which they were unfamiliar.

I suspect it's less "bypass" and more "did the extra research/work".

I don’t think there were laws preventing it. Just skiddish banks.

Stripe is the second most valuable YC company. Total valuation of all companies that YC funded (more than 1,900) now exceeds 100 billon dollars.

Airbnb has a private valuation of 31 billion. Stripe has a private valuation of 20 billion. Dropbox has a public valuation (DBX) of 11 billion.

So the two most valuable companies account for about half the total value of all the YC companies. This is what a power law looks like!

And this is why Y Combinator may not be right for your startup. The 100 billion dollars of valuation listed on YC's website may not be up to date, but it's clear that the top 10% of companies make up the overwhelming majority of their portfolio. So they go for moonshots. And they also invest in multiple competitors in the same space in the hopes that one will pan out.

So if you're building the kind of company that might be worth $100 million someday but won't ever be worth $100 billion, VCs and startup incubators might not be right for you, but just remember that a rejection from them doesn't necessarily mean you aren't on to something great.

The thing is that it is very hard to tell, early on, if you have a potential $10M or $10B company.

You're right: if YC had a crystal ball where we could somehow only invest in the $10B kind of company and never in the $10M kind of company, we'd do that.

But I don't think such a crystal ball is possible, because companies morph too much. Famously, Microsoft's first product was an interpreter for Altair Basic, which had a total market size probably < $10M.

So when we see a startup that has an idea that seems small, we ask ourselves, "What Microsoft is this the Altair Basic of?" (http://www.paulgraham.com/altair.html). Most of the companies that today seem like moonshots started with mundane, even trivial ideas.

So if you don't currently see how your idea can become a $100B company, that doesn't mean that you won't figure it out later.

> The thing is that it is very hard to tell, early on, if you have a potential $10M or $10B company.

I (kind of) disagree with one part of your comment. YC can't tell whether a startup has the potential to be a $10B kind of company, but a person starting a company can certainly decide whether they want to go for a $10B company.

Many people do - a lot of startup founders are trying to be the next Google. But some of them are not, in which case YC isn't right for them (and they'd probably need to pick the right idea/product/company to work on that can succeed without needing to be a $10B company).

Btw, I think you make a great point about Microsoft/BASIC!

Many people find that once they have built something to satisfy their original ambition, they enjoy growing and want to keep doing it. And some find they want to stay small and customer-focused, and some cash out and spend their days windsurfing. You can’t be sure which you will choose until you have the choice.

YC does not invest in multiple competitors 'in the hopes that one will pan out'. They just don't use competition as an exclusionary criterea like many VCs do. They invest in founders first and ideas second. When the idea is a secondary metric, inevitably you end up with competitors. Sometimes they even end up with competitors anyway, just because the founders pivot.

> They just don't use competition as an exclusionary criterea like many VCs do.

YC, originally started as Summer Founders Program [0], was an experiment to help PG & JL allocate seed capital differently from the norm.

So the reason why "investing in competitors" makes sense for YC as a VC firm is because YC invests a tiny fraction of $1m at the earliest stage in the life of a company, similar to the dollar amounts an angel investor would commit to a fledging startup.

Angel investing dollar amounts are an order of magnitude lower than what VCs typically invest because they invest at the growth or late stage, where an idea has been shown to be viable -- at this stage -- the product matters as much as the team behind it and thus the capital requirements are higher, usually in 10x, 100x multiples of a $1m, depending on the opportunity.

IOW, VCs don't necessarily use competition as an "exclusionary criteria" as you imply, it is merely the consequence of the magnitude of the capital at risk due to the stage at which many of them choose participate in the startup lifecycle.

A VC having a portfolio of companies competiting for the same set of customers would only lead to capital erosion -- it wouldn't any make sense to allocate capital to multiple independent entities that have traction, to exploit what is essentially the same market opportunity.

[0] http://paulgraham.com/summerfounder.html

Even though the top 99.9th percentile companies account for half of YC's return, it's possible that the 90th percentile companies nevertheless all produce a great return, more than sufficient to subsidize the 1-89th percentile, and YC just aims for that.

Ya just because I make most of my money selling hamburgers doesn’t mean I’m ignoring my regulars who come in for milkshakes.

What is an accelerator or a funding group for whom the portfolio is not following that power law? For example one where the top 20 companies each comprise say appx 2% of the portfolio?

Growth stage private equity buying out companies for multiples of EBITDA.

Whenever you're investing in early-stage companies with low marginal costs, that deal primarily in bits, not atoms, you're likely to end up with power law outcome distributions.

One that all have similar successes (e.g. all fail)

Odds are most early stage venture portfolios have a power law distribution, but of different magnitude.

Later stage you go, the more normal the distribution will look

> [I]t's clear that the top 10% of companies make up the overwhelming majority of their portfolio. So they go for moonshots.

You've just described the entire business model of every Silicon Valley VC firm, not just YC.

It appears to me that almost all companies theoretically have a chance of growing that big. You never know what area they'll pivot into and if they'll find unexpected growth along the way. And so I think that there wouldn't be YCombinator's top 10% without the long tail of lesser-valued (and even longer tail of failed) startups. A lot of it comes down to the people who run them and pure chance. So it doesn't make much sense to say that a startup will not be worth $SOME_VALUATION at some indeterminate point in the future. We see these 180° changes a lot when looking at successful companies in retrospect, and they can deliver order of magnitude differences in market cap.

Of course, if you're not building a startup but an "ordinary", self-sustainable company (37Signals is a widely known example), then VCs and YCombinator are not for you. But that kind of follows from the definition.

the top 10% of companies make up the overwhelming majority of their portfolio. So they go for moonshots

This is just a power law thing and what would be expected with any large group of companies.

Success isn't linear or a bell curve, people seem to understand those two distributions rather well power law distributions rather poorly.

> "This is just a power law thing"

Yes, every group of companies is going to have some winners and some losers. But VCs and (even more so) accelerators operate in a space where the power law produces a curve that is especially steep. The vast majority of their investments will fail entirely. In order to make up for this, they need a few big winners in order to make an overall rate of return that their investors expect.

If I'm investing in large cap consumer goods company stocks, that curve is likely to look much less steep since, for example, a company like Unilever is unlikely to fail completely.

"This is what a power law looks like!"

Exactly. That is why, now, if a VC looks at your company they think: "Will this company be worth more than all the companies we have ever funded combined". So if the idea isn't something close to that power law, they are out. My 'buy Japanese bubble gum' idea might not hit that.

No., they invest on the merit of the idea and any Venture Capitalist's funding is validation of the idea in and of itself!


In case you don't know, Y Combinator sold about half of its holdings(Dropbox) to other investors at around the same time as the series B financing round led by Index.

That’s the only time that Y Combinator has ever sold any portfolio company’s shares in a secondary transaction.

I don't understand why YC did that? It seems like not a good move.

Source: https://www.recode.net/2018/3/22/17150770/sequoia-dropbox-ip...

More specifically this is probably closer to a Zipfian distribution: https://en.wikipedia.org/wiki/Zipf%27s_law

I would guess it's closer to a yule-simon distribution, as that is the limiting distribution of a particular form of preferential attachment that has many similarities with how equity is assigned.

This also seems to imply that they charge too much. Don't get me wrong, I love Stripe, but they're still expensive for what they do with great pizzaz but which is really a utility service: an online credit card payment. Competitors should step up. Isn't 2.9% + 30¢ huge in the scheme of things? Add 1% for international and 1% for FX conversion and an overseas card transaction costs 5%. That's nice for Stripe.

Crazy that Elon Musk's top 3 founded companies (PayPal, Tesla, SpaceX) are higher valuation than YC's top 3 investment companies (AirBnB, Stripe, Dropbox).

Interestingly PayPal and Stripe are both competing for some of the same integrations. PayPal increased our revenues by 20% when we started using it in addition to Stripe.

Although only spacex is clearly Musk founded.

That actually makes the observation more interesting in some ways--none of the YC examples were "founded" by YC either.

One could argue that Musk has acted like a very aggressive version of an angel or VC--finds promising young startups in growth industries, provides them with capital (or, in Musk's case, some capital and lots of sweat equity, to the point of getting himself listed as the CEO and over-shadowing the original founders), and helps them to blossom into a precious unicorn.

Either way, it's interesting to think of Musk's personal endeavours in comparison with a group like YC. I don't really know what conclusions I would draw though.

PayPal wasn't founded by him, but X.com was.

To the founders and employees of all the other less "powerful" companies - well done too ... making the world better, however you are doing it, is powerful work. keep it up :-)

You should google power law, I think you misunderstood everything and have a chance to learn an amazing statistical concept today :)

How did you come to the conclusion that he misunderstood anything at all? Reading his comment I cant see how you think that.

No I understand it. I even have at least one book extolling it in business and life.

I just wanted to convey that the sheer act of starting and running any (non evil) business is a Good Thing and worth doing irrespective of your valuation, power laws or not. More power to their elbows. (That is such a flexible word!)

Any way, assuming power laws hold in life is like assuming financial markets have normal distributions - it's gravy while true, but if it ain't so, things can get hairy. :-)

> Several large new customers have also been listed on Stripe's website this week, including Alphabet Inc.’s Google and Uber Technologies Inc.

If Uber is now running payments exclusively through Stripe instead of Braintree, that is a significant blow. I heard that Uber's payments through Braintree was a significant portion of Braintree's total revenue, don't recall the exact number I heard, but it was something on the order of 25% to 40%.

I wouldn’t assume it’s exclusive. At the scale of Uber, it may be worth keeping both systems running and split usage between the two to negotiate the best rates.

That also has the benefit of system redundancy, in case one goes down.

"Goes down" could include things like "we're going to increase your pricing by 10 cents per charge". It's a much stronger negotiating position that Uber is in if they can say "we can switch 100% of our volume to Stripe in a minute by going to admin.uber.com and flipping a single feature flag".

Or even better: "we automatically route traffic to the cheaper option and this requires no human intervention, so don't even bother"

Large companies typically do payments in batches, not one-by-one, so the redundancy is not needed.

However, if they're trying to do per ride auths, then they might need redundancy there. Hard to imagine they do that.

I don't think they auth per ride. I definitely had a "you owe us money" flow after getting food successfully delivered though Uber eats on a deactivated card.

I get push notifications on auth on both my debit and credit cards. Weak evidence, but my hunch based on what I see there is that there's some dollar value where they pre-auth (somewhere around $25, I think).

> I wouldn’t assume it’s exclusive.

Ahh yeah, and also at the international scale. The article also states that Stripe is expanding internationally (Didi Chuxing, Grab), so it could be that Stripe handles Uber's international payments, whereas Braintree handles the U.S. ones.

True, but they are also at a scale where they can negotiate long term rates and contracts for predictable, long-term results for both sides.

Though Uber did add pay with Venmo, which is owned by Braintree/PayPal.

A lot of companies will have different payment solutions to deal with fraud and rebill failures. A charge may get rejected by one gateway and then accepted by the second or third.

I'm wondering when somebody from Braintree/PayPal will wake up and realize that this "developers first" strategy pays of and actually works.

Uhm isn't Uber using Adyen?

Some valuation context, although I'm fully aware that Stripe is a private company and that many of its investors could have investing or striking privileges.

Stripe: 20 billion. Adyen (stock symbol: ADYEN) 19 billion. Shopify (stock symbol: SHOP) 17 billion. Square (stock symbol: SQ) 39 billion. Paypal (stock symbol: PYPL) 107 billion.

Paypal cofounders Elon Musk and Thiel are early Stripe investors.

Former Paypal EVP Keith Rabois is a Stripe investor and was COO of Square.

Adyen is actually 23b as the 19b you mentioned is in Euros. It’s also noteworthy that Stripe has about 1/2 the revenue and the same growth as Adyen, so it will be interesting to see how this plays out in the public markets given that they have nearly identical business models.

You are right.

Right now, 1 euro is worth about 1.17 dollars.

Payments are and probably always will be a huge market. I think it's a good space to be in, even if you aren't the biggest in it.

I want to love Stripe, and I do wish them well, but I've gotten such weird feelings about some of their offerings.

On HN and other parts of the internet, representatives go out of their way to make themselves seem available if you have an issue, or have a problem. But when you finally do reach out, I haven't found them to be as receptive as they otherwise portray themselves to be.

Maybe it's miscommunication internally, or maybe it's employees not being well-equipped. But when you send a thoughtful, well-written message and don't hear anything back, it makes you wonder if it's just lip service.

Whatever it is, good on them for hitting such a great milestone. I know I'll never hit $20B in anything except in Zimbabwean dollars.

(I work at Stripe.) I'm really sorry to hear that...we do want to be available here any way we can, but something must've went wrong. I'd love to find out. Could you email me at edwin@stripe.com?

We've spoken Edwin. After our first exchange I didn't hear back from you. The first exchange was great, and unexpected, and maybe it set the bar a little too high. If you didn't have an answer, or had a bad answer, saying anything is better than saying nothing at all.

You unintentionally proved my point. It's not like I'm hiding behind this username.

I just emailed you and the other relevant parties. Going on the record: Not expecting to hear back. Just wanted to leave my thoughts in the open.

I'm looking forward to seeing how this one plays out!

Crickets so far from patio11, pc, and edwinwee. I wrote a kind and thoughtful email expressing my grievances and giving them the benefit of the doubt. But I've heard nothing back. I've even left voicemail.

Yeah, they have no intention of getting back to me. It's a shame.

I don't know if there is any RemindMe! bot in HN, but it would definitely be useful in this scenario.

Crickets so far from patio11, pc, and edwinwee. I wrote a kind and thoughtful email expressing my grievances and giving them the benefit of the doubt. But I've heard nothing back. I've even left voicemail.

I recently contacted Stripe about how their Stripe Billing invoices rendered in a confusing way in some situations. Within one week, they fixed the issue. I was pretty impressed by that responsiveness.

In 2017 e-commerce accounted for 9% of all retail sales. If I recall correctly, Amazon is the biggest e-commerce vendor and they are using Stripe.

There are no sure bets in business, but If I had to bet on a private software company's survival 20-25 years down the road I'd be hard pressed to bet against Stripe. I also think their leadership is very impressive w/ the Collision bros at the helm.

I hadn't heard about Amazon using Stripe before.

Here's an article from 2017 talking about it: https://www.geekwire.com/2017/amazon-quietly-starts-using-st...

Amazing. I wonder why? Amazon must have insane deals with the credit cards. This must be to access some tech that amazon doesn’t want to replicate for some small slice of its business - maybe on the fraud side.

I bet Amazon is only using Stripe for a small slice of their payments to cover gaps in their own payments stack. I'm sure it's worth it for them to be able to take payments at a higher rate than not be able to take payments at all. That's just a back-end optimization they can handle later.

I don't know what slice that is, but there's plenty of reasons you might go with a more expensive provider. Maybe they support some piece of technology you don't (like Apple or Google pay in browsers), or can process for a card type you can't (like one of the country-specific debit card schemes like EFTPOS in AU or Interac in CA), or just are set up to process payments in some country that Amazon doesn't have infrastructure set up yet. A quick google shows Amazon launched in India and Japan in 2017, so maybe one of those markets had some quirk they didn't want to bother supporting on their own until payment volumes got up.

It looks like Amazon and Stripe both launched in India in 2017, https://stripe.com/blog/india-private-beta

I would imagine that they have an integration with dozens of providers. It makes sense to spread it out so your business cannot be bullied by any single third party dependency and you can pit them against each other to get favorable terms across the board.

When you are as big as Amazon, there's a lot of money left on the table if you're running payments through a third party.

Not necessarily. You can likely bring your own processor and the deal you negotiated with them.

As a client, I love working with them. I never thought I'd say that about a payment processor.

I get pitched lower rates by their competitors all the time, but their software sucks. Giving a refund on Authorize.net feels like I'm being forced to travel back to the 1990s web.

Stripe's site is intuitive, their rates are good, they integrate easily with every software I use and their customer service speaks to me like humans. (Plus they have patio11)

I'm not even a Stripe customer but I still like to visit their site from time to time for design cues. Of mainstream B2B tech companies, I think Stripe has some of the best front end design I've ever seen. Everything is gorgeous AND useful. And despite so many products and pages, you never feel disoriented on their site

Agreed! The sheer amount of landing pages borrowing from Stripe's wide shadow button style is a testament to this

It's honestly shocking that authorize.net still even exists. It was a piece of shit from the get go and apparently has not improved.

I must admit I don't really understand Stripe's competitive advantage. When Uber wants to charge a customer's credit card, their main concern is the payment processor's commission, isn't it? It seems like the ultimate commodity business. Why aren't there 10 payment processors all competing to charge Uber's customer's credit card for a razor-thin fee?

At Uber’s scale, sure, but for smaller companies you have to understand that before Stripe you needed to get your own merchant account and that meant dealing with a bank. That’s one. You also had to deal with a payment gateway, which was pretty horrible before Braintree, and Stripe was another step function, that’s two. The processors are the middleman, and here there is all kinds of details and clever ways fees are sliced. Ubers of the world have the scale to invest in optimizing this but companies smaller than <500 generally don’t and an integrated solution like Stripe just solves a lot of headaches even if it more expensive in the end. Having the expertise to even understand how to optimize payment commissions is non-trivial.

So maybe I don’t understand because I’m a dumb-dumb lay person, but what does Stripe do differently from all the other payment processors that has given its rise and hype.

Is Stripe popular because its developer friendly? What makes it better than Apple Pay, PayPal, and Square? Normally, when I shop online, I’m usually given an option to type my credit card info or use my PayPal account. Where does Stripe fit into all of this?

Stripe is a payment processor for online payments. They are a company which take those credit card details you enter and actually take your money on behalf of the shop.

Apple Pay is supported by Stripe, so it's a non-competitor (Apple Pay is just a way of giving your card details to a processor).

PayPal is the closest competitor, but their APIs are quite old (although improving) and when Stripe launched PayPal's pricing was very cmoplex. Also people just don't like the PayPal model for business.

Square is a payment processor, mostly, for physical payments mostly seemingly for hipster coffee shops. They do online payments, but nowhere near the same level Stripe do them.

For my side project website (see my profile), I started to implement PayPal and got seriously confused with the documentation and process (I'm not a professional developer). Mid-process I actually didn't even know if I was even dealing with PayPal or Braintree anymore. Then magically I received a package in the mail from Moneris. They shipped me a stack of those carbon-copy paper credit card slips and machine (that cha-chunk sound)... for my website. This was like 3 years ago.

I asked my professional dev friend what the heck was going on and he told me to use Stripe. Never heard of Stripe before that. Friend also told me his revenue was frozen for weeks/months by PayPal for his projects. A weekend later, I was done implementing Stripe.

My partner insisted I use PayPal because that's what everyone recognized/used, but I flat out refused after implementing Stripe.

> I started to implement PayPal and got seriously confused with the documentation and process (I'm not a professional developer)

The feeling is the same for most "professional" developers too. The old XML API is horrible by modern standards.

They do have a new one though that's less of a pain.

The little box you type your credit card in is a huge pain in the ass for companies larger and small due to some compliance requirements from financial institutions called PCI. I can’t understate the ass pain, system complexity, legal review, etc etc that this can bring. Doesn’t matter if you are big or small, it’s painful and can be costly. Big companies can pay to handle that, smaller companies can’t and have relied on historically clunky solutions to take payments.

Stripe can make that little box you type your credit card painless, seamless and highly accessible for small and large companies. They are generally delivering a high quality experience throughout their process and many of their staff are generally awesome.

Full disclosure, I work at a big company and we use Stripe. I used to work at startups in the early 2000s and handled payment solutions. The world is better with Stripe.

You didn’t answer the question. What makes stripe different from Square?

Square is focused on in person card transactions whereas Stripe is focused primarily on online transactions and supports multiple types of payment method (CC, ACH, ApplePay, Bitcoin, etc). Stripe also handles outgoing payments (marketplace, top-ups, etc) and is just now getting into in person transactions.

One thing I have personally seen that, they have lower threshold for accepting clients. Maybe they rely more on fraud detection than on pre-signup verification.

Stripe is a payment processor, so when you type in your credit card info, that’s Stripe processing that payment.

I have heard for years people criticizing the payments industry as a low margin commodity biz. What has changed? Or they just got it wrong?

The first principles changed. From Elad Gil in First Round Review:

“In the tech world, particularly after PayPal was sold to eBay, the dogma for many years was ‘Don't ever do payments, it's too hard and fraud will blow up and destroy you.’ And during the first internet wave, that was true. It was a challenge to get the type of data and information you needed to really deal with fraud at scale,” he says. “But fast forward to today and take a look at companies such as Stripe and Affirm. It seems that the fraud problems weren’t as bad as we thought and we’ve since developed systems, processes and data science tools that just didn’t exist back then. So if you’d applied first principles thinking five or 10 years ago, asking if those assumptions were still true and digging into whether it was still too hard, then maybe you would have come to a very different conclusion about starting a payments company and gotten ahead of the curve.”


Also, the fraudsters found the online payments business fairly early on, before there were a lot of real customers. In the late 90s, many merchants had as many fraud attempts as actual transactions, and a few fraudsters working through a box of stolen credit cards could take a small merchant to the cleaners. Now that online payments are so large, and there is a finite number of sophisticated fraudsters, fraud as a percentage is lower.

It makes me wonder if the same dynamic is at work with cryptocurrencies now. Fraudsters found and adopted them early, because if your goal is to commit fraud, having a currency not under the control of the banking system is a pretty critical attribute. But now that the mainstream world is aware of them and people are actively researching what they might be good for, that may not hold true forever.

The difference is that crypto is only good for fraud. So it'll never move past this early stage.

Stunning analysis

What a hot take!

I don't know if it's apocryphal or not, but one of my favorite first-principles stories is the jet engine.

At some point in the 1930s a paper was written arguing from first principles that a jet engine could not work to propel a plane. Axial flow compressors were to inefficient and radial-flow compressors generated too much drag.

What the author didn't know is that another already written paper had come up with significant improvements to axial-flow compressors by using airfoil-shaped blades, which combined with improved metallurgy was more than sufficient for a working turbojet.

So it was a perfectly sound argument for why something was impossible, but it was still wrong because the assumptions were changing.

The tech industry looks like this all the time; in many of pg's essays he mentions that a lot of successful ideas look like toys, and part of the reason for that is this core concept; as the underlying assumptions change something can morph from a toy to big business overnight.

That still doesn't explain margins though. Competing processors keep pace with fraud-fighting tech as well. For large customers, processing is still a commodity service and they have a lot of negotiating power to call up Stripe and demand they lower their rates.

Until we see Stripe's financials I would not assume anything about healthy margins. Square also had a lot of hype in the early days but turns out their processing margins were really low and most of their current valuation is from expanding into other products like business loans.

Stripe's valuation is similarly based on a hypey "grand vision" to offer other services that actually make money, not by magically making businesses pay more for commodity services.

> It seems that the fraud problems weren’t as bad as we thought

Fraud is only as bad as we know. And it's very bad, payment providers just aren't going to go around telling you about it.

I worked for a payment provider and it's very very difficult to eat fraud because it wipes out low-margin profits quickly. It's a tough dance - there isn't a lot of wiggle room between being too harsh in rejecting payments and being too lenient in allowing payments. And criminals are very, very good at moving on to another attack vector once you figure out what they are doing.

People approach payments in the same way they approach, say, twitter: They think of the simplest parts of the business, and think that's all there is.

If all you are doing is taking credit card numbers, taking money out, and handing it to merchants, then sure, there's relatively little value there, and the competition at that level can be fierce.

But what you find in companies like Uber or Amazon today is not just taking credit cards: They run marketplaces where signing on is easy. They will take very different payment forms in different countries: The world is not really all about credit cards in US dollars. You need to fight different kinds of credit card fraud, build a reporting infrastructure, integrate with some traditional accounting system, and connect it all to your logistics in some fashion. A large marketplace will have dozens, if not hundreds of people dedicated to payments, and that without caring of the little bit of taking credit cards. It's in those areas where payment companies don't have feature parity, and a big part of what you'd pick one over another, especially as a startup. And in differentiation there's money, not in taking all the physical retail sales for Walmart.

I suspect that eventually a few big players will really be feature complete with each other and margins will go down, but maybe there is a big winner there, who has an expensive to replicate product, or whose product relies on so much data that competition is impossible. If that were to happen, that kind of big winner's valuation would be far higher than what we see today from Stripe, Square, Paypal or Alipay.

One important piece of Stripe's margin story that differentiates it from commodity processing is their marketplace and platform product, Connect. Without saying too much (I am a former Stripe), this product enables both processing of cardholder charges as well as payouts to 1099 workers and other businesses that the platform is processing on behalf of. When people talk about Stripe serving Uber, this is the kind of unique value that Stripe is bringing to the table.

An explosion of e-commerce, partly initiated and made possible by Stripe

https://stripe.com/global shows a continent with no lights on.

Please come to Africa. The lights are on here.

Hey. Fellow African here :)

What part of Africa are you in? Asking because I work at Flutterwave, flutterwave.com (a payment processing company) and we can definitely help you to process payments.

It's easy to see how, taking a cut off the top of a huge percentage of online purchases is an insanely nice place to be.

I've personally found myself preferring Stripe-based payments when there are multiple options (such as PayPal and Amazon pay) as well. Maybe I'm wrong on this, but I feel like dropping my credit card details into a Stripe window is more private than connecting to PayPal or Amazon accounts. It feels more like just swiping a credit card at a store.

Pretty annoying that it’s illegal for me to invest in any of these newish tech companies.

It's not illegal for you to invest in Stripe. It's simply illegal for Stripe to try and sell you their stock. If you happen to have personal connections to Stripe leadership, and they haven't hit the regulatory shareholder limit (after which they must start filing disclosures with the SEC), you could legally buy all the Stripe stock you could afford.

Have you seen an example of a regular middle-class person actually doing this? Because in all the stories I've heard, company leadership just say "no, you need to be an accredited investor to do that", and that's it.

Parents and college buddies, mostly. I've never seen anyone who wasn't personally connected to the founders or VCs be allowed to invest if they weren't an accredited investor because it's simply not worth the hassle to the company.

So the accredited investor requirement doesn't apply in the case you stated?

The accredited investor rules are limits on the company, not the investor. It depends on how many non accredited investors they have.

Why is it illegal? How would you invest in them if it were legal?

They are probably referring to not being an accredited investor.


Indeed. In an era where hot tech companies don't go public until they've eclipsed $20B (if ever!), the accredited investor rule feels like the rich & powerful making sure they can keep all of the best opportunities to themselves.

No it's not. You can invest on Republic in all newish tech companies. Check on them out: www.republic.co

A bit off topic but I'll ask it here anyway - I see Stripe Atlas advertised as an easy way to start an "Internet Business". What exactly is the definition of an Internet Business? If I sold a physical product, would I still be able to set up the company through Stripe Atlas?

I work on Stripe Atlas. Your question is answered in a bit more detail here: https://stripe.com/docs/atlas#should (and the answer below that one).

We have a number of product decisions to make about how we do things, so the design center of Stripe Atlas is Internet companies. If one incorporates e.g. a Delaware LLC through Stripe Atlas, that’s an LLC. LLCs can e.g. own apartment buildings. We generally assume you probably won’t use us to form an LLC to own and operate an apartment building. There is, at present, no plan to have an Atlas meetup to swap tips on finding great exterminators. But if e.g. you sell SaaS, we have a lot to say about selling SaaS, and your peers in Atlas will run businesses similar in character to yours.

Many Stripe Atlas companies sell physical products; most of them are technically-enabled or sold over the Internet. If we were hypothetically not able to support a product business, it would not be because it is physical, it would be for one of the reasons on the link above.

So happy to hear. They deserve it! Couldn't remember the name for a second, but so glad I never have to deal with authorize.net again ... ever!

I once wrote an OLE control from Authorize.net that used XML in Powerbuilder to communicate with a Lisp server to do my payments. Stripe is better :)

Please come to South Africa! We need a decent alternative to PayPal for international payments/subscriptions

Stupid question: how does a $245 million dollars bring a company's valuation from $9 billion to $20 billion?

Last I checked, $245 million =/= $11 billion

It means a VC paid $245 million to purchase 1.225% (which is $245M divided by $20B) of Stripe's stock.

In transactions, is it typical to just create new stock such that the newly created stock is 1.225% of the final total? Would the previous investors agree to diluting their stock like that? Or is it common to sell from a common pool of stock that's owned by the company (who is that? the CEO? what is the company if not for the stock distribution?)?

You should read a book on this, it's not something that someone can/will explain in a one off paragraph comment.

Any recommendations? Thanks!

I was assigned several in lae school, they wouldn't be relevant to you. Any introduction book on corporate structure and corporate governance would do as a foundation (for your jurisdiction) I would imagine, any specific questions you would have after that would be answered in the followup material in the references of such a book.

Business school and law school students have to buy many books on these topics, and their resale value is low. Any second hand book shop has lots of them, so does abebooks. It doesn't have to be expensive, it's the time you have to invest that 'costs' (in the generalized economic sense) the most.

I would also like a rec

That means the investor agrees that at the time he buy stocks, the company is no longer worth $9 billion but it's worth ($20 billion - $245 million). Basically because they developped their business, their technologies, hired/trained people, they "created" value and the company is worth more than before.

The funding itself doesn't increase the company valuation, but it validates it. Before funding the board can declare that the company is worth $XX billion, but the fact that an investor agrees to put money on the basis of that valuation makes it real.

$20B and still need funding rounds.

Now only if it didn’t take 7 days to get your payment processed

Which country are you in? We're working on speeding up payout times around the world -- it's something people are (rightly) very sensitive to. If you email me at john@stripe.com I can look into it for you.

Hi John, using this opportunity to ask when you guys coming to South Africa? We REALLY need some international processing here

Impressed you took the time to find critique and respond to it.

You are lucky! Argentina is over 3 months (!)

I moved on to Gate2shop and Argentina payouts are once a week.

You are lucky! In Peru we can't use Stripe at all.

You are lucky! In Yorkshire, Stripe uses us!


It would be great if they never go public.

They are a great example of how an API is all that really matters. Anyone could have done their biz, but they made a good API.

I agree that their API is great, but there's so much more to building a business - most of all perseverance. Many people can make a good or great API but very few can execute on the rest.

Well in this case their API is backed by a connection to credit card systems... the hard part. The card companies could have done it, but they needed Stripe to show how obvious it is.

The reason Stripe exists is because the card companies couldn't do it. They were incompetent, unimaginative, lazy, slow, arrogant, etc.

Exactly what you typically see out of entrenched goliaths.

It's the same reason several of them that have tried can't catch up with Stripe, despite trying for years, despite vast resources, and despite Stripe showing them how to do it.

It's only in a non-reality-touching theory that the card companies could have done it (ie if you entirely disregard everything about them and only focus on resources and then give them attributes they don't possess). In actuality, they couldn't do it.

Microsoft and Nokia couldn't have produced the iPhone. IBM couldn't have produced AWS. AOL couldn't have produced Google. Disney couldn't have produced Netflix. Facebook couldn't have produced Instagram. Xerox couldn't have produced the Apple II. Sony and Microsoft couldn't have produced Steam. GM and Ford couldn't have produced the Model S. Boeing and Lockheed couldn't have produced the Falcon 9. Wyndham and Hilton couldn't have produced Airbnb. The taxi cartels couldn't have produced Uber or Lyft.

Culture acting as an innovation blockade is the unifying impediment between them all, not lack of resources or that something was technically too challenging.

I agree. What I meant by "could" is it was right in their backyard, as are all your examples. Their failure is representative of bigco culture.

This is soo true. One of the best comments I have seen on HN.


> The card companies could have done it

That's not how card companies work. There's 100s of payment processor out there and the card companies let you shop around and pick one that's right for you. They do however require said processors to have large amounts of money just to access their systems.

Stripe has lots of funding to do that AND get good developers to build a decent payment processor.

what makes the Stripe API so good? Are you referring to the API design itself? Or just the fact that they programmatically exposed this functionality.

How much money would it take to duplicate the offerings and marketing of Stripe.

And shouldn't that be the actual valuation?

And when we have a formula that can express developing a user base and market trust, particularly in the face of a company that already has it, may be we will.

Until then, it's not terribly accurate to say "A team of 5 can write it in 6 months, so call it $2 mill valuation after hardware and support" because spending some money to have the exact product DOESN'T mean you have nor can get their customers.

$2 mil on devs and $1B on marketing should do it.

AND all their current customers (and customer pipeline) AND their roadmap.

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