Stripe cofounder here. Needless to say, this article contains many factual inaccuracies.
More broadly, articles like this are part of why we didn't announce our previous financings. If you don't also announce metrics, it's easy to write articles like this.
Hey Patrick, we'd be happy to include any numbers that you share publicly. We gave you that opportunity yesterday, but you declined. You guys have been fundraising and having M&A talks over the last 6+ mo, meaning your numbers are "out there." I find it hard to believe that everyone we spoke to is grossly inaccurate in the exact same ballpark. I'm happy to concede that the figures may be outdated, and we acknowledged that in the article. But we also compared you guys against competitors' metrics from the same period. Our goal is to be fair and accurate. The more you share, obviously, the better.
It does not work this way. You do not get to cite made up numbers with anonymous sources that clearly contradict some public info (e.g. the graph PG tweeted in November) and use that disinformation as an attempt at blackmail to get the company to release its numbers.
Flipped around, Stripe would not write a blog post about Pando saying all sorts of wildly wrong things and then say "well if you want to correct us and tell us that your traffic is not dwindling and you're not almost out of money, we'll give you that opportunity because our goal is to be fair and accurate".
We didn't write "stripe's metrics today are X." We wrote, "Stripe's metrics 6 months ago, when they were in fundraising and M&A talks were X...during the same period its competitors metrics were Y, Z." Seems fair and accurate.
Stripe doesn't need to share data if it doesn't want, but then criticizing us for being inaccurate is a bit ridiculous.
Also, it's not our job to tell Stripe's (or any company's) story as they want it told. It's to report on the ecosystem. Its better for the ecosystem – investors, competitors, customers, etc. – if they share transparent numbers.
>Stripe doesn't need to share data if it doesn't want, but then criticizing us for being inaccurate is a bit ridiculous.
Ridiculous is to making ANY present tense assertions when your using old data, like in the title you don't say "Memo for Stripe for where it was 6 months ago" or any other indication of the time period at hand.
Your magazine is the only thing here poisonous for the ecosystem.
Writing articles on anonymous sources' information and criticizing a private company for not sharing their data, so you can write a new blog post is a bit ridiculous.
#1: I understand the desire to do comparison in the market and look at Stripe's multiple vs. others, but PayPal and Stripe are not equal in forward looking growth. To try and apply Stripe's valuation multiple to PayPal's earnings assumes that PayPal is in the same sort of growth stage, which it clearly isn't. And most likely, Braintree was not either when they sold. Why sell if you're eating everyone's lunch?
#2: While numbers from six months ago may have been circulated and Pando apparently has those numbers, a lot can change in that timeframe. Large deals can be closed, growth can accelerate or very important technology can mature that has the potential to upset the status quo in Stripe's favor. General analysis of the market and knowing the habits of several of Stripe's investors makes me think that a key factor that is not public is in play. I expect a deal that gives them far better profit margin.
#3: "Stripe is a transaction-based business with a clear model — and one not growing particularly rapidly if it took two years to get to just $1.5 billion in annual payments volume our sources report as of six months ago." This is a bad assumption to make. As a rule, I never assume a company has a transparent business model as there are many aspects of technology and deal structure outsiders are not privy to. Who is to say Stripe doesn't have a new payments product on the way? Would it be so crazy for them to start snapping up downstream fulfillment companies with an $80mm war chest to maximize profit margin? Maybe so as they of course don't want to compete with customers, but who knows?
#4: Another issue with the assumption about payment volume is a linear growth curve. If you say "Braintree did $12bn in payment volume when it sold in late 2013, that means $2bn in volume growth per year, more than stripe with $500mm per year over 3 years of life". However, looking at articles that state Braintree's payment volume shows they were apparently doing only $3bn annually in 2011 at their $34mm Series-C (http://techcrunch.com/2011/06/29/accel-puts-34-million-in-on...). If Stripe is assumed to be making a rapid growth stride to make this raise, then they likely have a similar (or stronger) growth curve than Braintree did at that point (https://twitter.com/paulg/status/403183731449413632/photo/1)
The problem I have with the article is that you're making a series of assumptions and treating them as fact, or at least as highly likely. This is difficult to make stick with a company that is deliberately opaque, as is their right to be.
* I am of course analyzing this from a very-outside perspective and my assumptions should be taken with a grain of salt. Or ten.
I would like to use Stripe for one of my startups.. but wasn't able to find any numbers.. so since the company is young, and you get a small fraction of the total processed... with 30 employees at Stripe... I figure you have a huge burn rate.. and I'm hesitant to use it.. not when I'm already familiar with authnet, paypal, and others..
Stripe looks great, but no numbers means I can't be sure if you guys are doing well.. or if I'm going to be doing an integration with a different company in a year.
> I can't be sure if you guys are doing well.. or if I'm going to be doing an integration with a different company in a year.
If you can spend a couple extra bucks, you might consider integrating with Spreedly instead of with any individual processor. They're a unified API for 55+ gateways, and a gateway-agnostic card vault. This is one of the worries using them eliminates; you can use Stripe no matter what your concerns are, because if they do disappear in a year, you can point your sites back at Authnet or whoever you prefer without changing any code. No interruption of service, no lost customer info to continue billing.
You do have to trust Spreedly will still be around, but that's much easier than trusting in a new processor. Unlike a payment processor, they don't suffer from existential threats like a failure in their risk evaluation allowing a fraud event to wipe out a month's worth of profit at a time. Their business model basically prints money (run an API, keep a few pennies of each transaction) and they've been at it for years.
First off, congrats on the hard work and incredible progress you guys have made.
I'd just comment that you responding to this, along with a YC partner, only adds credibility to the story. If its BS, it should be totally ignored. The fact that both of you took time to attempt to discredit an article from a blog would make one question why you feel the need to do so.
Interestingly I got down-voted on this comment too.. Ironic because I am generally impressed with and love Stripe and its story. Just sayin' to not take an outlet like Pando too seriously.
You make a good analogy but in my personal opinion, stretch it too far. The greatest scientists don't get caught up in squabbles about creationism with fools - they simply let their work prove it wrong. They are too busy to engage in petty debates with a blog. Why should founders of a billion dollar company care what a blog says? Now if it were a regulatory institution or a credible news organization that investors take seriously/Stripe was publicly traded, then its a different matter because media perception would have a material impact on the business. Debating Pando does no benefit for them, so it makes one wonder why they engaged.
Shocking that PandoDaily got their facts wrong! :-) In a weird way, the press coverage feels more bubblish when the press can't figure out what is going on and do this sort of article (one presumes to draw out data they couldn't get in the first place). Of course it could just be to get the rage views.
That graph doesn't have labelled axes, so it's pretty hard to glean much of anything from it accurately.
Assuming blue is Nov 2012-Nov 2013, that means that the starting point for 6 months ago is roughly 2/3 of the way across the blue. Eyeballing it, the height roughly doubles during that period, which would be consistent with the article.
1) There are almost certainly a lot of inaccuracies in here. I saw a few on a quick skim of the article.
2) Exponential growth is a hard thing for most people to wrap their minds around. The best tech investors--many of which invested in this round--understand it. Most bloggers do not. The former camp has a better track record on valuing companies like these, although of course a lot of investments don't work out. But I would much prefer to give money to the investors in this round to invest for me than the writers of this article.
3) It's easier to spew hate than it is to build value. While bloggers write stuff like this, companies can just ignore it and laugh about it over drinks in a few years.
Basically your comment boils down to "I skimmed the article and it seemed hateful and inaccurate". And then something strange about spotting exponential growth being left to the big boys.
On the contrary, I read the entire article and found it useful. The author admits that getting accurate numbers on Stripe isn't possible at this point. I wish Stripe all the best, but it still has a tough road ahead.
Sam knows Stripe's numbers. So the fact that he was able to see inaccuracies immediately is more meaningful than the fact that you read the entire article and found it useful.
Sama, you may have missed it in your "quick skim" but Stripe isn't actually growing that fast (~50% / yr). Braintree is growing much faster and even stodgy old paypal isn't too far behind in terms of growth rate. For its size and valuation, the growth story is fairly underwhelming.
As for the trackrecord and judgement of the investors, no argument that they are among the best. But only Khosla is new money, meaning they are the only one that took significant new risk (although they got plenty of downside protection via liquidation preferences, as we explained). Sequoia and Founders Fund were already heavily invested in Stripe, thus making it a much easier decision to "re-up" in this new round and pad the company's war chest for the highly-competitive slugfest ahead.
I/we don't hate Stripe. In fact, I think they're a great company. I just think the narrative around this funding round when it was announced on Wednesday glossed over the legitimate challenges that the company faces.
Per my earlier comment, the liquidation preference thing is just completely inaccurate. And the ~50% growth rate comment is just so insanely inaccurate I'm not even sure how to respond. (do have a look at this, though: https://twitter.com/paulg/status/403183731449413632)
I/we don't hate Pando. I just think the narrative around this article when it was posted this morning glossed over the legitimate facts the company faces.
As I wrote to Patrick above, they've been fundraising and having M&A talks over the last 6+ mo, meaning their numbers are "out there." The figures we reported may be outdated, something that we acknowledged, but I find it extremely difficult to believe that they're wildly inaccurate for the timeframe.
This article seems very dismissive of Stripe even though it claims to be fair to them.
"But that was before 2011: When PayPal realized it was hated and named a new president in David Marcus who dramatically changed the culture "
Really, is this true ? The above statement seems to claim that Paypal is not that hated anymore. Current paypal users who have been long term users, I wonder what they have to say.
"The reason PayPal held its ground for so long despite its poor reputation is because it had the most consumer account data and the most name recognition."
Umm, I would say No. The reason was "monopoly" and companies like Stripe have been a major reason that the monopoly has dwindled.
"PayPal had become the big, ugly monster, screwing up transactions left and right with a mix of poor technology and bad customer service. Merchant accounts were frozen haphazardly, and the company often took its sweet time unfreezing them. PayPal was so widely loathed among developers, founders, and customers that even with its advantages of scale, ubiquity, and familiarity, companies were eager to try something else."
> Current paypal users who have been long term users, I wonder what they have to say.
I opened my PayPal account in July of 2000 and they were my primary processor for 11 of the 13+ years since. They've never given me a reason to hate them, or even dislike them. None of the "horror stories" I've read about others seemed irrational once all the facts were on the table. I never understood the integration gripes either, particularly before all the newer offerings came about (express checkout, paypal pro, etc). It was always just pasting in a payment button, defining a notification URL, and an IPN script comprised of 20 lines of code in any language -- it's just POSTing back the same POST you received.
Bit of a tangent: my first "traditional" merchant account provider processed 6 times PayPal's volume last year ($1.2 trillion), and charges as little as 0.09%+$0.30 for debit cards versus the 2.9%+$0.30 flat rate all these 3rd party processors start at. Why do so many startups write off going straight to an ISO/MSP? Or do they, but Stripe/Braintree make better offers? They don't all have BS fees, and flat markups over interchange are becoming the norm for pricing. Popular payment gateways like Authorize.net have drop-in libraries for just about any language or shopping cart you can imagine.
The same as debit: interchange plus 0.04%+$0.10. Even though I sell mostly B2B, Visa debit cards make up over 25% of my transactions, all at 0.05% interchange. Interchange on CNP credit ranges from 1.6% to 2.8%, but most cards are closer to the low end.
There are no extra fees for Amex/Discover, and "unqualified transactions" (which is nothing but commercial purchasing cards sent to the gateway without line-item info) are <5% of volume over the past 12 months.
The MAP charges $15/mo in fixed monthly fees, which includes paying for a 3rd-party for PCIDSS compliance (the SAQ and quarterly scans). The payment gateway costs an extra $20/month I think. Regardless, the savings on transaction fees pays for them immediately.
No, they gave me that rate when I was doing just a few thousand a month in volume, before I launched my current SAAS business and switched off PayPal subscriptions. I'm getting that through Vantage now. I used to use FDIS, which initially gave me similar rates, but they had a habit of adding new fees every month which is why I switched to a processor that does interchange-plus instead of a rate table.
I happen to have this picture I took for someone else that didn't believe me a few months back. This was the rate sheet in the paper application I signed to open the account.
Do you think there is a value to the somewhat ubiquitous use of paypal in the consumer online space in that many customers have paypal accounts? In the sense that it is a bit more frictionless? I can see how a B2B market might be different.
I don't care if they win or not as long as they are sustainable and stay awesome.
I'll use them for my stuff and my business and others can use whatever they want.
I literally wouldn't use PayPal if they paid me to use them (in fact I would pay for and setup a merchant account with online payments processing long before I would touch PayPal).
Given that Stripe is about to process payments for Twitter, I wouldn't be tremendously worried.
As a side note - Braintree was around before Stripe. Remember that. It's not Apples to Apples on their size, it's about growth, and as PG has publicly shared several times, Stripe is growing at a ridiculous rate. https://twitter.com/paulg/status/403183731449413632/photo/1
Agreed that Braintree had a head start and that's not to be overlooked. Also, landing Twitter would be a big coup, and potentially lucrative depending on what kind of commerce they enable. But I'd dispute the claim that they're growing at a ridiculous rate. Everything we've heard puts it close to 50%/yr, which is not great given their size and valuation. Braintree was above 100% last year, Square grew 200%, and even PayPal grew 30%.
Stripe is a transaction-based business with a clear model — and one not growing particularly rapidly if it took two years to get to just $1.5 billion in annual payments volume our sources report as of six months ago.
Another way to interpret this story is that in just two years, they grew to process $1.5 billion. Braintree is processing $12 billion after having been around for an additional four years.
I didn't see any analysis of the components of that $12 billion, either. What if Uber comprises 30% of their volume? Then perhaps they aren't as valuable as it seems. After all, if Uber decides to switch processors, then Braintree is fucked. It seems having a wider base of customers is usually advantageous and less risky when compared to relying on a few whales.
“It’s literally inconceivable that someone starting a company would choose to use Braintree or PayPal,” Rabois says. “Stripe has become the monopoly for new startups.”
You keep using that word. I do not think it means what you think it means. Really.
Braintree and Venmo are services that he could not even conceive of a startup using? I suspect that they might have like.. um.. facts that might dispute that worldview.
More broadly, articles like this are part of why we didn't announce our previous financings. If you don't also announce metrics, it's easy to write articles like this.