Stripe Is Now a $20B Company
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(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
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.
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.
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.
Think of it as a marketing or business development strategy, rather than a service of its own.
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.
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!
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. :-)
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.
SYKE
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.
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
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.
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.
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.
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.
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.
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.
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!
You've just described the entire business model of every Silicon Valley VC firm, not just YC.
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.
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.
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...
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%.
However, if they're trying to do per ride auths, then they might need redundancy there. Hard to imagine they do that.
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.
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.
Right now, 1 euro is worth about 1.17 dollars.
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.
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.
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.
Here's an article from 2017 talking about it: https://www.geekwire.com/2017/amazon-quietly-starts-using-st...
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 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)
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 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.
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.
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.
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.
“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.”
http://firstround.com/review/future-founders-heres-how-to-sp...
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.
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.
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.
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.
Please come to Africa. The lights are on 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.
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.
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.
Last I checked, $245 million =/= $11 billion
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.
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.
I moved on to Gate2shop and Argentina payouts are once a week.
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.
Thanks.
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.
And shouldn't that be the actual valuation?
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.