I am spinning off a portion of my business into a new startup this year and Stripe is at the top of our list as our subscription/payment provider. We've been playing in their sandbox and cannot wait to get going to production.
That said, most naturally occurring growth is exponential. In the case of a webservice, whenever a new user increases the chance of another new user signing up by at least some constant factor, no matter how small, you have exponential growth. Things working against that are churn and later, like in the case of Facebook, the saturation in your market. If you discount for those factors (I don't think they hugely affect Stripe right now anyway), EVERY application that has even the tiniest viral co-efficient, even just traditional word of mouth, will grow exponentially.
The specific case of Stripe transactions is particularly interesting. They grow in both the number of companies using Stripe as well as the size of each of those companies. I have no knowledge of Stripe metrics, but I am fairly certain they've seen exponential growth over the past months. Much like Square btw ;)
Stripe is one of the few companies I know of where people are literally begging them to expand to their country which is a good indicator of their potential.
Also, much of the complaining about Paypal seems to be in the form "I violated Paypal's ToS, and then they closed my account." Well, maybe you should read all those legal documents before entering into a business agreement?
The payment processing part seems to be great until it goes wrong but when it does they have the minimal resource possible devoted to dealing with it.
I've also had a lot of clients that used paypal to sell stuff. Paypal hated them too.
If this is true, there's a doomsday scenario: if the SV bubble collapses (say, due to some macro-economic change that dries up the glut of angel funding), then a lot of those companies that primarily provide services to other startups will collapse with it. There's more. As the companies go out of business for lack of (other startup) customers, a lot of the remaining startups that depend on those outside API's could go down for lack of infrastructure to stand on. Things could spiral down to a bad place pretty quickly.
Look at stripe for example, they're an excellent company that has proven their product is in demand. It's much more reasonable for a company like this to be allowed to scale versus the likes of pets.com.
I mean, much like drop.io, almost all of those companies have some value. Even facebook is worth something, it's just, well, not worth 60 billion or whatever it's selling for now. I mean, yeah, they do have the userbase (right now) to beyond what google has done to advertising... but damn, that's hard to do. And I don't think that Facebook has the deep understanding that google has that if people start thinking of them as creepy, they are dead. (I mean, I think google has the same problems as an autistic guy at a party; google /understands/ that being creepy is bad... but google doesn't have a good understanding of what creepy is. Facebook is the guy that read some "fast seduction" crap and is now proud of being a total asshole. )
I mean, I think I understand why google can make so much money off advertising and (very related) why people think facebook can make so much more; See, I just bought some advertising in Mountain View Safeway stores. Go to the mountain view safeway and you will see green on black prgmr.com logos on the dividers you place between your food, instead of the usual pictures of real-estate agents. I mean, all the people I know at google have talked to me about it, and they thought it was cool, but I've been talking about this for a while, so I don't know if they noticed it because they know me or what. Figuring out the effectiveness of meatspace advertising is difficult. If i bought ads on google, I'd be able to easily track how many customers I got per dollar, right? Of course, anyone would be willing to pay more for advertising if they knew what they were getting out of it; if you give me customers and I make $10 off each customer, what's wrong with giving you $5? heck, I could give you $9.
Problem is, I don't think that online advertising is as traceable as you think. I mean, sure, I know that guy that just signed up clicked on to my site through a google adwords ad, right? but you don't buy something the first time you hear about it. Maybe that guy saw a blog about me last month? the google adwords link might have just been more convenient for him than the organic search results.
I think that online advertising, in general, is overpriced because of this.
I understand that the value proposition of facebook is that they (potentially) can track buyers better. that blog you read about me last month? probably had a facebook 'like' button. Maybe they could then use that to better measure my actual advertising returns?
The biggest problem I see with that proposition is, well, that's a hard problem to solve at all... and not only do they need to solve it, they need to solve it and simplify the results down to the point where your average MBA can understand them.
I'm completely outside and absolutely not in the know but it seems to me like (a) professional high risk investors collectively investing $100ms in an industry where companies can be worth $100bs do not make a bubble (the 2001 bubble was in the trillions) and (b) a lot of the typical "bubbly" claims about new economic realities might be true this time.
I think both are evident here. The the former, this is $20m into a company that provides a service to customers that are willing to pay for it, not $200m into something with impossible to value (it could be zero) potential. High risk - yes. Irrational, foolish or systematically risky - I think no.
For the latter, this is a company that has already made an impact in the giant dominated world of financial transactions. The important part is that they did it with very little (relatively) capital input. At a pinch they probably could have done it with less, though maybe more slowly. That is a "new economic realities" type occurrence.
Maybe the world's huge credit card companies and banks can be partially replaced with much smaller new companies. Maybe paypal has run its course. Founded with millions by a few smart guys. Growing to massive scale (with the help of $200m investment). Spending 10-15 years in a dwindling cas cow phase and ultimatey being succeeded. Maybe it is viable for companies to exist on a smaller cycle: being founded, creating value and ultimately being outcompeted by new small companies in shorter timespans. etc. etc. That kind of thinking is bubbly in 2000 when its being used to justify $bn valuations for companies that lose money and don't really serve anyone. For a lot of the companies maturing now, they don't really need any justification, but maybe they can be explained this way. Stripe, from what I understand, creates real tangible economic value for its customers, charges for it and creates a lot of surplus value besides. Interestingly it helps other startups exist.
Heinleinian makes the (reasonable) argument that the interdependance (reliance on APIs) makes for economic fragility - investments fail making services fail making other services fail etc. But isn't this economies in general? Most B2C commerce would collapse if Visa & Mastercard went out of business. Construction collapsed when banking fails which collapsed when merchant banking screwed up. Interdependency is economics and overall its pretty robust.
I suppose its possible that Stripe and Github receiving funding will signal to angels that companies seen as having a customer base that is primarily other start-ups are the way to go, and therefore open the floodgates of angel funding further. But maybe not. I really don't have strong feelings about this yet at all (which is why I said "there is an argument to be made" and not something stronger). Like you I'd like to see a discussion about it though. It seems like we're in a rather unprecedented time for new startups which makes it all pretty hard to predict.
Congrats to the team, much deserved and looking forward to what this product becomes.
Request: quarterly subscriptions. I know they can be handled with hooks but it shouldn't be that way. :)