How Stripe turned into PayPal Mobile Era

When, in 2010, young entrepreneurs, brothers Patrick and John Collison, were busy developing ideas for new applications, they noticed that even now, when cloud technologies and various optimization tools are available to everyone who wishes, the developers are still faced with one fairly simple, First look, the problem: accepting online payments from customers. The search for a solution to this problem soon led to the creation of a company that has become one of the most promising startups in Silicon Valley - Stipe , which, like us at PayOnline , specializes in organizing payments on websites and in mobile applications. In this translation article you will find the story of the Collison brothers, find out how Stripe began and how it looks from the inside today, won the love of its partners and why competitors should be wary.

The first sign that John and Patrick Collison, the founders of the bright phenomenon in the world of mobile payments, called Stripe, are not addicted to corporate paraphernalia is the North Face backpack. Imperceptible in appearance, gray with orange stripes, it lies at the table leg, a few meters from the entrance to the Stripe office in San Francisco. And if an ordinary visitor does not even pay attention to him, then the “stripe”, as the company’s employees call themselves, barely saw him, immediately realize that the company’s president, John Collison, is now in the office. John does not have his own office, or even a workplace, so he often works at a common table on the first floor when he is free. His older brother, Patrick Collison , managing director of the company, works in the conditions of the few best: he sits at a small table wedged between the wall and the workplace of the system administrator, and sometimes he shares it with his brother. “It's great when there is where to put things,” says John, and immediately adds that any desktop eventually ends up cluttered with these very things and that it can be for the better.

The absence of their own spacious offices did not stop Collison, two Irish immigrants just over 20 years old, who quit colleges for their vocation, from creating one of the most talked about and copied startups of the current boom, which is gradually becoming a significant new force in the conservative financial services industry. 5 years have passed since the creation of Stripe, and two years ago the brothers were included in the list of “ 30 entrepreneurs under 30 ” Forbes. And today Stripe is confidently meeting its goal - the revolution in the field of digital payments. Last year alone, the size of the company increased to 380 employees, while its value rose from 3.5 billion to 5 billion dollars. Against the background of the cost of its “elder brother” in the industry, Square payment service, which is now estimated at $ 4 billion, this figure looks impressive.

Once, working only in the US market and being a company that had to beg banks for a meeting, today Stripe routinely makes deals with partners of the level of Visa, Apple Pay and Alibaba, expanding its influence in 23 countries around the world. Facebook, Twitter and Pinterest chose Stripe to support their e-commerce business, and traditional retailers like Best Buy and Saks Fifth Avenue for their first projects in the mobile market. Recently, Slack also joined this list, who handed over his payments to Stripe, refusing in his favor from another competitive product.
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Stripe is a private company and therefore does not disclose information about profits. Most of the hundreds of thousands of its paying customers are relatively small. However, the most famous customers, Lyft, Shopify, Kickstarter, Postmates and Wish, process payments worth tens of billions of dollars, and most of these funds go through Stripe. Industry sources estimate Stripe's annual payments at around $ 20 billion. For each transaction processed in the USA, the company takes a commission of 2.9% plus another 30 cents on top, which is roughly comparable to the size of the commissions of other payment companies, such as Square mentioned above. Large customers at the same time, of course, receive a discount for large volumes. All this suggests that the current annual income of the company is more than 450 million dollars.

According to the company, 27% of Americans at least once made a purchase that went through its system - a big increase compared with the result of two years ago at 3.8%. However, the Collison do not lose their vigilance. “No matter how inspiring this success is, we are still very far from achieving our goals,” says Patrick. “If one of our employees starts thinking that we have already achieved what we wanted, it will be a big problem for us.”

John Collison, co-founder and president of Stripe

Stripe’s success in simplifying digital payments is just a step towards a much more ambitious goal. The company wants to become the main system on the basis of which entrepreneurs could create new forms of commercial activity. Something like the Amazon Web Services system, which supports all types of Internet businesses, but with an emphasis on financial transactions. Stripe technologies, among other companies, already use the market of driving services Lyft , the crowdfunding platform Kickstarter and the service of subscriptions Slack. Last year, the company took a significant step forward by adding a tool that some analysts call the next major trend in mobile commerce. We are talking about the buttons "buy", which allows stores to sell, publishing products and services in third-party applications such as Facebook, Pinterest and Twitter.

On its way, the company faced formidable rivals. One of the main competitors, Braintree, now owned by PayPal, announced about conducting operations in 2015 in the amount of about $ 50 billion, which is twice the amount of Stripe operations. Braintree is also proud of the fact that Uber and Airbnb are among its main customers. Another notable competitor is Stripe - Adyen , a fast-growing European startup that not only has large operating volumes, but also actively expands to new markets.

Yet, according to Stripe, only 2% of world trade today is online. Therefore, the Collison and their investors, including Sequoia Capital and Andreessen Horowitz, believe that there will be enough growth opportunities for everyone. In this sense, only the company itself can become the main enemy of the company as a result of its own mistakes. “Stripe requires a higher level of professionalism than other companies, as well as the ability to survive stressful situations better than others,” says Patrick. In other words, mistakes are unacceptable when it comes to working with other people's money. According to him, Stripe managed to organize the internal structure and adjust the processes in such a way as to carry out its activities in objectively difficult conditions of the industry. Now, Patrick believes, the company will have to re-learn how to do the same in the conditions of its double growth. And this is one of the challenges that it will face in 2016.

The combination of success, modesty and thoughtful approach is typical for Collison and is the main reason for the optimism of colleagues regarding Stripe. Stripe board member Mike Moritz of Sequoia Capital calls the brothers among the smartest people he has ever supported - high praise from a guy who previously sponsored companies such as PayPal, Yahoo, and Google.

Patrick Collison, CEO and one of the founders of Stripe

The brothers share responsibility for the products, but 25-year-old John is involved in working with partners and sales, and 27-year-old Patrick is responsible for technological development and at the same time is the public face of the company. David Lee , one of the senior partners of the investment fund SV Angel, describes Patrick as a smart, balanced and charismatic leader who makes wise decisions - a combination of qualities that is rarely seen in one person.

The brothers learned how to program at an early age and sold their first company, Auctomatic, for $ 5 million as teenagers. Patrick, who has attended lectures at MIT for some time, is distinguished by a great love of reading books. On its shelves you can find about 600 books, although he himself admits that no more than a third of them have finished. Themes range from physics and programming to feminism, literary studies and economics. John, who threw Harvard, looks somewhat calmer, but not inferior to his brother in the sharpness of mind or versatility.

The Kollisonov never had the ambition to turn Stripe into a real company. They just wanted to solve the problem they encountered even when they themselves were ordinary application developers: the Internet and mobile phones simplified the task of creating global services, but paying for their services remained a terribly complicated process. Therefore, Collison created a system that allowed developers to accept payments at a speed of several minutes. After launching the service in 2011, it quickly gained popularity, first from the developers of other applications, and soon from the larger companies.

At the beginning of the company's existence, John and Patrick did everything: they wrote the code, dealt with support service tickets and ran after customers. But rather quickly, they realized that they should deal with more “global” things and therefore they took the company's development strategy into their own hands. “This is a prerequisite for any startup that wants to outgrow its current capabilities and stop stomping,” says John. The brothers spent months on the hard work of selecting the first 10 workers, knowing that they, in turn, would attract the next wave of volunteers. For this first group of cadres, the Collison allocated 10% of Stripe shares - a size that is solid by the standards of common practice. They worked with many of the candidates for at least one week, before giving them their approval. In the end, all the participants who passed the selection turned out to be the former founders of the companies.

Today Stripe has become a much more professional company, while maintaining the same careful approach to hiring new employees. Any interviewee, for example, has the right, if he considers it necessary, to refuse a particular candidate. At the same time, when the founders found the best candidate, they did everything they needed to lure this person to the company. According to Patrick, he spent almost 50 hours seeking a positive response from Claire Hughes Johnson, a veteran of several Google executive positions, where she only recently led a well-known project of unmanned vehicles. Ultimately, Claire joined Stripe as chief operating officer.

The idea of ​​carefully building a company from the very beginning of its existence has justified itself. Stripe was able to avoid problems with products and employee errors, even though the company grew twice every year. Today, talented workers flock to Stripe from everywhere, not only because of its growth rate, but also, for the most part, because people simply want to work with Collison. “They are at the very top of the unspoken hierarchy of the Valley,” says Aaron Levi, chief executive officer of Box , who was once a mentor to both brothers. The sales department, once consisting of only 2 people, has grown to 20 in the last two years. In order not to yield to Adyen's foreign territories and other competitors, the team for working with foreign banks, regulators and customers was increased over the same period from 5 to 70 people.

Stripe has grown with its most successful customers due to its flexibility. When Lyft decided in early 2015 that he needed to speed up the payment process to his drivers, the company turned to Stripe. In December, Lyft launched Express Pay, an option that allowed drivers not to wait several days and receive payment for their services almost instantly. This feature required Stripe to find a way to refuse the ACH network traditionally used for electronic payments and to create instead a service that allowed making transfers to drivers' bank accounts through their debit cards.

A similar situation occurred with Twitter, which turned to Stripe for help in the implementation of its first payment product. Twitter wanted to simplify the sale of goods to thousands of large and small sellers by adding a “buy” button to their app. It was a serious and difficult task, largely because sellers used dozens of different technological platforms to support their services online. Here's how Nathan Hubbard, Twitter’s commercial vice president, described the result:

“Before their arrival, electronic payments looked like a plate of spaghetti: everything was mixed up, so that it was difficult to figure it all out. But they [Stripe] have simplified the whole process, both for developers and webmasters, so we didn’t even have to worry about anything. ”

Working with Twitter also helped form the basis for Relay, a product that allows stores to sell products through other companies' applications and greatly simplifies this process. Stripe's ability to simplify the complex really enjoyed Stewart Butterfield, the chief executive officer of the advanced corporate Slack messenger. Last year, Slack refused Braintree services in favor of Stripe, precisely because of the opportunities that the company offers to work with different currencies and types of payments, as well as due to the availability of ways to integrate Stripe applications with the company's accounting software.

“In the matter of transferring money, there are so many very different, completely delusional nuances,” Butterfield admits. “And Stripe managed to do everything much easier.”

The "Strips" sometimes speak of their main mission as an increase in the "GDP of the Internet." Of course, this figure can grow without Stripe. Collison understand that in order to play a key role in this, they will need to take Stripe out of a start-up party directly into international commerce. They will also have to continue to develop new products, such as Relay, which simplifies the emergence of new types of commercial activities, no matter how bizarre forms they take. An example of this is Beepi, a fast-growing Stripe customer who sells used cars online or through an application and delivers them directly to the buyer’s house with a large bow on the hood. Beepi machines are one of the most expensive products sold through Stripe, and Beepi’s quarterly turnover, according to its CEO Al Reznik, will soon reach tens of millions of dollars.

“Two or three years ago, trying to brainstorm the development of commerce, you would never have thought of delivering used cars with bows on the hood,” says Patrick. “But as soon as this actually happens, this idea seems completely obvious.”

Regardless of what the next obviously popular commercial models will be, the Collison will probably be ready for their appearance. Nobody is talking about an IPO right now: “Stripe” focused on the basics. “The problem of many companies in the Valley is that they rush things and strive to overestimate their current success,” says Patrick. And the Collison, apparently, are not going to repeat this error. They understand that there is an uneasy path ahead.