Stripe valuation soars to $95B after latest fundraising(ft.com)
ft.com
Stripe valuation soars to $95B after latest fundraising
https://www.ft.com/content/b9949a88-6c09-4de5-92e7-73994bb2b62f
150 comments
https://archive.is/mraaX
Well, I guess the crazy correlation between initial server-side tech choice and valuation has just gotten a lot crazier: https://twitter.com/logicmason/status/1371255029412233218
Edit: Based on the published data I can find, Stripe and Coinbase alone have added more to their valuations in the last year than the total valuation of the top 50 YC-funded startups including Stripe and Coinbase was last year.
Edit: Based on the published data I can find, Stripe and Coinbase alone have added more to their valuations in the last year than the total valuation of the top 50 YC-funded startups including Stripe and Coinbase was last year.
I think that correlation can be somewhat misleading, given that there has got be a strong correlation between timing of when those companies launched and their choice of initial programming languages.
I mean, nearly all of the top companies in that list were started in the very late '00s and early '10s time frame, when Ruby (and to a lesser extent Rails) was (a) very well established and (b) known for being a high-productivity language for small teams.
For example, NodeJS and Go barely existed when many of those companies were founded (or, in some cases like AirBnB, didn't exist), so I definitely think there is likely to be a different list of languages for top startups in 10 years time.
I do think, though, that it is definitely no accident that languages like Java and C++ appear way under-represented given their prevalence in the industry at large. My personal theory is that what is most important for developer productivity is the feedback loop between making a code change and being able to see that change in a running application. Scripting languages make it often as trivial as saving a file and refreshing, while compiled languages can, in addition to having a costly compile step, also have a very costly deployment step. I remember in the early 00s the painful experience of editing Java code and waiting nearly minutes for a local deploy step to get that code running again.
I mean, nearly all of the top companies in that list were started in the very late '00s and early '10s time frame, when Ruby (and to a lesser extent Rails) was (a) very well established and (b) known for being a high-productivity language for small teams.
For example, NodeJS and Go barely existed when many of those companies were founded (or, in some cases like AirBnB, didn't exist), so I definitely think there is likely to be a different list of languages for top startups in 10 years time.
I do think, though, that it is definitely no accident that languages like Java and C++ appear way under-represented given their prevalence in the industry at large. My personal theory is that what is most important for developer productivity is the feedback loop between making a code change and being able to see that change in a running application. Scripting languages make it often as trivial as saving a file and refreshing, while compiled languages can, in addition to having a costly compile step, also have a very costly deployment step. I remember in the early 00s the painful experience of editing Java code and waiting nearly minutes for a local deploy step to get that code running again.
+1 to the timing bias. For a long time Rails was the default choice for startups. A list of companies ordered by valuation will have the top of the list be somewhat biased towards age, so the older companies (that started in the age of Rails) will feature more at the top.
FWIW, Airbnb has moved more and more of its backend tech stack off of Rails and onto the JVM; I'm not sure if that's true of other companies in the list. Since that effort started in... 2013-ish? Airbnb went from single-digit billions in valuation to three digit billions, despite a global pandemic ravaging the travel sector. So it's not as clear cut as that list makes it look! Most of Airbnb's valuation was made during a time when it was actively switching away from being a Ruby/Rails shop, and onto a hybrid-but-dominated-by-JVM (backend) company.
I agree generally that productivity helps differentiate successful software companies from unsuccessful ones (although there are lots of other factors too). I think it's more nuanced though than just the feedback between code change in editor to change reflected in locally running application. I used to work on DevTools at Airbnb, and the Rails app was viewed as much less productive to work in according to internal surveys than Java services, despite not needing to wait for Gradle builds. One reason the Java services felt more productive was because the delta between code change and code running in production was much lower — in part because the type system caught more bugs, so there were fewer rollbacks. The Rails monolith needed massive test coverage to keep it stable, and even then, tests missed bugs that Java's type system — as anemic as it is — caught. (Of course, the Java services had tests too; the advantage was they had both types and tests.) Rollbacks caused more havoc than a little time waiting for a Gradle build. FWIW, there were also small Rails services outside of the Ruby monolith, but those tended to not be particularly popular to work on either — so it wasn't just about services vs monolith. Although not everyone felt this way, overall more folks preferred Java to Ruby once Airbnb hit a certain size, even in terms of productivity. People didn't feel done with their change until it shipped successfully, so faster time-to-see-local-changes but slower time-to-ship-overall due to rollbacks ended up feeling less productive overall — especially as code aged and the original authors moved onto different projects or left the company.
Of course, that's something that matters more once you have a larger team and a larger (and older) codebase. Since the list is about original tech stack rather than current tech stack, maybe in ten years the list will still look biased towards environments that favor fast local changes over anything else — even though that won't necessarily reflect what those companies still use.
(Or maybe newer languages like Go and TypeScript balance time-to-see-local-changes and low-defect-rate well enough that the difference will be less obvious? Go's incredibly fast build times feel almost like a scripting language, and a TypeScript/React setup with Hot Module Reloading makes Rails feel practically sluggish in comparison; maybe this is no longer as much of a tradeoff.)
FWIW, Airbnb has moved more and more of its backend tech stack off of Rails and onto the JVM; I'm not sure if that's true of other companies in the list. Since that effort started in... 2013-ish? Airbnb went from single-digit billions in valuation to three digit billions, despite a global pandemic ravaging the travel sector. So it's not as clear cut as that list makes it look! Most of Airbnb's valuation was made during a time when it was actively switching away from being a Ruby/Rails shop, and onto a hybrid-but-dominated-by-JVM (backend) company.
I agree generally that productivity helps differentiate successful software companies from unsuccessful ones (although there are lots of other factors too). I think it's more nuanced though than just the feedback between code change in editor to change reflected in locally running application. I used to work on DevTools at Airbnb, and the Rails app was viewed as much less productive to work in according to internal surveys than Java services, despite not needing to wait for Gradle builds. One reason the Java services felt more productive was because the delta between code change and code running in production was much lower — in part because the type system caught more bugs, so there were fewer rollbacks. The Rails monolith needed massive test coverage to keep it stable, and even then, tests missed bugs that Java's type system — as anemic as it is — caught. (Of course, the Java services had tests too; the advantage was they had both types and tests.) Rollbacks caused more havoc than a little time waiting for a Gradle build. FWIW, there were also small Rails services outside of the Ruby monolith, but those tended to not be particularly popular to work on either — so it wasn't just about services vs monolith. Although not everyone felt this way, overall more folks preferred Java to Ruby once Airbnb hit a certain size, even in terms of productivity. People didn't feel done with their change until it shipped successfully, so faster time-to-see-local-changes but slower time-to-ship-overall due to rollbacks ended up feeling less productive overall — especially as code aged and the original authors moved onto different projects or left the company.
Of course, that's something that matters more once you have a larger team and a larger (and older) codebase. Since the list is about original tech stack rather than current tech stack, maybe in ten years the list will still look biased towards environments that favor fast local changes over anything else — even though that won't necessarily reflect what those companies still use.
(Or maybe newer languages like Go and TypeScript balance time-to-see-local-changes and low-defect-rate well enough that the difference will be less obvious? Go's incredibly fast build times feel almost like a scripting language, and a TypeScript/React setup with Hot Module Reloading makes Rails feel practically sluggish in comparison; maybe this is no longer as much of a tradeoff.)
How doable is it to compile the data from all startups instead of just from YC?
I feel like this data should be one of the most important aspect of choosing a tech stack. Even though it’s hard to infer the data because there’s years of delay between inital tech stack choice and the success of the startup.
I feel like this data should be one of the most important aspect of choosing a tech stack. Even though it’s hard to infer the data because there’s years of delay between inital tech stack choice and the success of the startup.
Would be interested in accounting for startup age. Wouldn't be surprised if the Ruby companies are older on average
Not a YC company, but Square was also founded on Ruby. There was a pretty large monolithic Rails app that AFIK, may still exist.
Though we hired a bunch of people from Google, who brought Java, and we went hard towards SOA. Around 2013 there was a Java vs Ruby war in engineering, with many upset people. It ended in peaceful coexistence. But most things in the main payment flow ended up Java.
Though we hired a bunch of people from Google, who brought Java, and we went hard towards SOA. Around 2013 there was a Java vs Ruby war in engineering, with many upset people. It ended in peaceful coexistence. But most things in the main payment flow ended up Java.
Would also expect the numbers to even out somewhat if you normalize for the number of startups choosing a language e.g. Ruby
Airbnb and Stripe are both W09 and S09, respectively. Brian Armstrong worked at Airbnb before cofounding Coinbase, which was S12.
Super happy for the Stripe team. They deserve this.
I have worked in payments for over 10 years and I can tell you Stripe changed the game, made payments better and made it accessible to all.
Before Stripe payment processing was a nightmare. Payment processors had overly complicated APIs and poor documentation(if at all). The fee structures were intentionally not clear and plenty of them had minimum processing amounts and/or monthly fees which made payments processing (outside of PayPal) inaccessible to companies or individuals that lacked capital.
Stripe fixed the sh*t show that was payments by creating a really good payments API with clear documentation and a fee structure that was clear and affordable for even the smallest of companies.
Next Stripe created Atlas. Now let me tell you something, as someone that does not live in the US, but had a startup, this was huge. When I had a startup, and was looking for a local payment processor that could process in the US, they wanted to charge me thousands of dollars just to get started and that is when I personally knew a large chunk of their senior management.
Atlas (which I have never been a customer of) made the opening of a company in the US easy a which gives me and countless others access to Stripe, an affordable high quality payment processor.
And I can go on and on about the other things Stripe has done to make payments and finance on the internet better (connect, capital etc.).
Watching the Stripe rocket ship from a far has been amazing. They are changing payments and finance and I look forward to seeing them continue to innovate and push the limits of what can be done.
Congrats Patrick, John and the Stripe team.
I have worked in payments for over 10 years and I can tell you Stripe changed the game, made payments better and made it accessible to all.
Before Stripe payment processing was a nightmare. Payment processors had overly complicated APIs and poor documentation(if at all). The fee structures were intentionally not clear and plenty of them had minimum processing amounts and/or monthly fees which made payments processing (outside of PayPal) inaccessible to companies or individuals that lacked capital.
Stripe fixed the sh*t show that was payments by creating a really good payments API with clear documentation and a fee structure that was clear and affordable for even the smallest of companies.
Next Stripe created Atlas. Now let me tell you something, as someone that does not live in the US, but had a startup, this was huge. When I had a startup, and was looking for a local payment processor that could process in the US, they wanted to charge me thousands of dollars just to get started and that is when I personally knew a large chunk of their senior management.
Atlas (which I have never been a customer of) made the opening of a company in the US easy a which gives me and countless others access to Stripe, an affordable high quality payment processor.
And I can go on and on about the other things Stripe has done to make payments and finance on the internet better (connect, capital etc.).
Watching the Stripe rocket ship from a far has been amazing. They are changing payments and finance and I look forward to seeing them continue to innovate and push the limits of what can be done.
Congrats Patrick, John and the Stripe team.
Stripe are an engineering first company. You even see the Collison brothers posting here on a regular basis. Creating great tech is built into the DNA of the company.
Great to see them investing further in their home country as well, and mentioning that some of their global leadership team will be based in Dublin.
Great to see them investing further in their home country as well, and mentioning that some of their global leadership team will be based in Dublin.
Ireland is also a tax haven, but sure, they're benevolently investing in their home country, that's totally what it is.
They never implied anything about motive. Really, why does motive even matter? Opposing motives can meet on the same positive result. It happens all the time with humans; whether it's two friends, or a corporation of 50,000 people, or a nation of 300 million.
Your pessimism seems to ignore the fact that this is a good thing regardless.
Your pessimism seems to ignore the fact that this is a good thing regardless.
They were quoted saying the move "cements [their] Irish roots [and] provides enough space to gradually expand our team."
It'd be a breath of fresh air if CEO's could just say it like it is. I think more people would trust their brand and be more willing to invest in them. Our inner monologue wouldn't have had to fill in the blank with a possible hidden motive. Addressing the most common reason why companies "move" to Ireland could have been an opportunity to build trust.
It'd be a breath of fresh air if CEO's could just say it like it is. I think more people would trust their brand and be more willing to invest in them. Our inner monologue wouldn't have had to fill in the blank with a possible hidden motive. Addressing the most common reason why companies "move" to Ireland could have been an opportunity to build trust.
But the brothers are actually Irish, and seem pretty invested in Ireland. Unlike in the case of almost every other tech CEO, who play up features of Ireland that they don't have experience with.
Like, I am very glad that the Irish government supported these brothers, and very sad that the Irish banks refused to work with them when they tried to start Stripe in Ireland.
Like, I am very glad that the Irish government supported these brothers, and very sad that the Irish banks refused to work with them when they tried to start Stripe in Ireland.
It's an added benefit. That's good, no?
Or are you saying all Irish businesses are bad because they are based in the tax haven.
If you don't invest in developing your home country, which country should you focus on? Or we can throw a dart at a map and choose whatever country the dart lands on?
Or are you saying all Irish businesses are bad because they are based in the tax haven.
If you don't invest in developing your home country, which country should you focus on? Or we can throw a dart at a map and choose whatever country the dart lands on?
The dart idea might give us better distribution?
Throw a dart and solve problems/invest in solutions for where it sticks. Mostly be fixing ocean problems but I'm OK with that.
Throw a dart and solve problems/invest in solutions for where it sticks. Mostly be fixing ocean problems but I'm OK with that.
Wouldn’t this just mean that countries with larger land mass get more investment rather than countries with more people?
Well, (my) darts aren't accurate, so, maybe? I couldn't hit Belgium from 3m away but I probably couldn't hit USA either. I'm thinking water still wins. And it depends on the map projection too. Maybe the dart is to focus on that specific circular area, like 10km radius or something? Or maybe every group gets an equal slice on the dart board? Just something to help distribution rather than some money-motivated/short-term-outrage method we seem to have now.
Ah, my snarky comment turns into a legit technical question.
Well, throwing a dart wouldn't be too bad though....
Well, throwing a dart wouldn't be too bad though....
This is fun! To test the theory I just threw a pointy pen at the map I have hanging on my wall 5x - 3x water, 1x Ethiopia, 1x USA. Unfortunately I have to do some real work otherwise I'd do a few hundred more and see where we ended up
edit: Looking at my map, I think they arbitrarily shrank the size of the oceans to prioritize landmass (it's one of those ones where you scratch off the countries you've been to), so it's quite possible that the proportion of darts hitting water would be higher normally
edit: Looking at my map, I think they arbitrarily shrank the size of the oceans to prioritize landmass (it's one of those ones where you scratch off the countries you've been to), so it's quite possible that the proportion of darts hitting water would be higher normally
The Irish are some of the best dart players in the world, so I think Stripe would end up in Dublin either way.
Most of the loop holes have been closed in Ireland over the past few years. I'd look at the Netherlands, Malta or Luxembourg these days if you're looking for shady booking accounting practices.
It helps that the Collisons' are from Ireland, but there's also a highly educated workforce, native English speakers, a pro-business government, world class backbone internet connectivity, favourable timezone, plenty of renewables on the electricity grid.
It helps that the Collisons' are from Ireland, but there's also a highly educated workforce, native English speakers, a pro-business government, world class backbone internet connectivity, favourable timezone, plenty of renewables on the electricity grid.
I always read comments like this as: "Every country with lower corporate tax rates than my own is a tax haven"
If a company does business within your borders while your army looks on and the populace waxes lyrical about it being unjust, who is really at fault for that?
Do foreign countries not have the right of sovereignty to make their own laws and tax rates?
If a company does business within your borders while your army looks on and the populace waxes lyrical about it being unjust, who is really at fault for that?
Do foreign countries not have the right of sovereignty to make their own laws and tax rates?
No. At least not if you're part of a free trade union like europe.
I partially own a company in the EU, the neighbouring countries have different laws and wildly different company tax rates, care to elaborate on your assertive "no" here? Last I looked countries in the EU also set their own tax rates.
Feel free to prove me wrong on that matter, we are in a sub-thread about Ireland being a tax haven if you need a reminder.
Feel free to prove me wrong on that matter, we are in a sub-thread about Ireland being a tax haven if you need a reminder.
Sorry it was not clear, I didn't mean that all countries in europe have the same taxes.
I was saying that they should in my opinion.
I was saying that they should in my opinion.
Just as an FYI, every tech company invests in some Irish presence, for the tax benefits.
However, most of them don't put engineering there, and a lot of the leadership is often in London.
That's the context of the post that you replied to, so that you can maybe understand more of the nuances.
However, most of them don't put engineering there, and a lot of the leadership is often in London.
That's the context of the post that you replied to, so that you can maybe understand more of the nuances.
Throw out any number for Stripe's valuation and I probably believe it at this point.
95B honestly seems relatively cheap.
Trying to figure out why this was announced on a Sunday (in the US) though.
95B honestly seems relatively cheap.
Trying to figure out why this was announced on a Sunday (in the US) though.
Agree, for me it would be a buy at $200B
For some context, this is roughly
- One tenth of Apple,
- One seventh of Google,
- (Joke entry: 2/7 Teslas),
- More than half a Walmart,
- Just under one Netflix,
- A SalesForce,
- A Pfizer,
- Nearly 2 IBMs (Makes sense to me),
- 2.7 GMs.
Strong statements, though I'll never put money against this sort of thing.
- One tenth of Apple,
- One seventh of Google,
- (Joke entry: 2/7 Teslas),
- More than half a Walmart,
- Just under one Netflix,
- A SalesForce,
- A Pfizer,
- Nearly 2 IBMs (Makes sense to me),
- 2.7 GMs.
Strong statements, though I'll never put money against this sort of thing.
but only 1/4th of VISA, who I think they'll overtake in the next decade or so.
isn't a lot of Stripe's revenue going _through_ VISA? It doesn't seem to me they're replacing them as much as possibly making them more money.
I think PayPal should be the better comparison/overtake target, at 290B.
I think PayPal should be the better comparison/overtake target, at 290B.
5 years later: Stripe announces B2C bank account offering, with <unique features X, Y, Z>, including an introductory 5% cashback on anything processed through Stripe.
What is Stripe doing that BoA/Chase/Citi/Capital One/US Bank/Wells Fargo isn’t or can’t?
What are the profit margins on consumer banking? It seems like a commodity product, I expect it to be not amazing (compared to tech companies’ profit margins).
Why would giving 5% cash back solve any of Stripe’s problem? Any of the other banks can do the same now, but they obviously don’t think it’s worth it to lose that much money for customer acquisition, especially when switching costs are so low.
What are the profit margins on consumer banking? It seems like a commodity product, I expect it to be not amazing (compared to tech companies’ profit margins).
Why would giving 5% cash back solve any of Stripe’s problem? Any of the other banks can do the same now, but they obviously don’t think it’s worth it to lose that much money for customer acquisition, especially when switching costs are so low.
Card networks operate on a completely different set of dynamics than payment processors. You need to convince banks to issue and promote your logo. If you want to become your issuer, you now need to keep credit card debt on your books, not to mention customer acquisition costs in the insane rewards-driven card market.
This hype tech nonsense is ready for a big time disruption.
This certainly makes Stripe the most valuable private startup in the world.
Where does Stripe rank among the world's most valuable private companies, though? It's easy to find lists of dubious quality like this: https://news.yahoo.com/10-most-valuable-private-companies-21..., but I'm sure there are more lurking. What are they?
Where does Stripe rank among the world's most valuable private companies, though? It's easy to find lists of dubious quality like this: https://news.yahoo.com/10-most-valuable-private-companies-21..., but I'm sure there are more lurking. What are they?
> This certainly makes Stripe the most valuable private startup in the world.
Stripe has not been a startup for a while, they've been in public operations for about 10 years now and probably power a large portion of online purchases.
Stripe has not been a startup for a while, they've been in public operations for about 10 years now and probably power a large portion of online purchases.
Why does any of what you said disqualify them as a startup?
Probably because they are a billion dollar mature company. Every company was a startup at some point but at some point they are a mature company that shouldn’t be called startup anymore. Stripe is certainly one of them.
I don't get it. I follow PG's definition of a startup [1]. I think Stripe still qualifies as one.
1. http://www.paulgraham.com/growth.html
1. http://www.paulgraham.com/growth.html
Well its PGs perspective whose opinion is not accepted or valued world wide, Indian government doesn't consider you a startup any more after crossing certain age and revenue. Also a lot of companies will not recognise you as a startup(for offers) after you cross certain threshold. Stripe is far from that threshold.
This is not a startup by any meaning of the word “start”. He should call it “high growth company ” If you go by growth then Apple may be considered a startup after 40 years in business.
Bytedance was valued at $180 billion back in November. I was shocked to learn how many products they have besides Douyin/TikTok.
https://techcrunch.com/2020/11/05/tiktoks-parent-company-byt...
https://techcrunch.com/2020/11/05/tiktoks-parent-company-byt...
Koch Industries is worth well in excess of $100 billion.
Coinbase is still private and is valued at $100 B.
Would they have that valuation if they were non-custodial?
Probably be worth more. Being custodial is a liability and Coinbase doesn't charge anything for it.
I don't necessarily know if this is relevant. Coinbase's custody business is a relatively small (but growing) branch mostly for institutions. Its consumer product is not driven by the fact that it is custodial, but by its function as a gateway between the crypto and fiat world. Where you ultimately put the crypto you acquire through them is entirely up to you, and in fact Coinbase does provide a non-custodial wallet product called Coinbase Wallet.
Bosch is privately owned and they made 71 B€ of revenue in 2020, so about 180 times bigger than Stripe.
Yeah, I don't know about these lists. Cargill valued at 40bn when wikipedia says they own 60bn in assets and profiting...
https://en.m.wikipedia.org/wiki/Cargill
https://en.m.wikipedia.org/wiki/Cargill
Cargill is an agritrader. They are a big company but definitely not as valuable as Stripe (look at some of the other ABCDs).
Trading businesses never get high valuations. But they throw off real cash. Different strokes for different folks.
Trading businesses never get high valuations. But they throw off real cash. Different strokes for different folks.
True.
They don't get high valuations because their earnings fluctuate a lot, and their average profit margin is like 1-3%, as compared to like stripe or apple which probably has like 30%.
They don't get high valuations because their earnings fluctuate a lot, and their average profit margin is like 1-3%, as compared to like stripe or apple which probably has like 30%.
> Cargill valued at 40bn when wikipedia says they own 60bn in assets and profiting
This is true, but it's unclear how much debt they are carrying, and a quick Google couldn't find out.
This is true, but it's unclear how much debt they are carrying, and a quick Google couldn't find out.
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Is Stripe unprofitable? What kind of scale are they going to reach that will push them over the edge into the black that they haven't been able to reach at the vast scale they already have?
If they are profitable, why go the expensive equity route rather than using retained earnings? Or bonds? American Airlines recently sold $10 billion of them at 5.5%. Surely Stripe could do just as well or better.
If they are profitable, why go the expensive equity route rather than using retained earnings? Or bonds? American Airlines recently sold $10 billion of them at 5.5%. Surely Stripe could do just as well or better.
Payment is just the entry point; from there they are probably going to expand into other quasi-bank services; the first low-hanging fruit that comes to mind is Advance Loans secured by CC receivables; easy, popular and highly lucrative.
> easy, popular and highly lucrative.
Eh? How can it be all three of these things at the same time? If it's easy and popular, won't that push down the prices you can charge?
Eh? How can it be all three of these things at the same time? If it's easy and popular, won't that push down the prices you can charge?
From the article:
Keeping away from the public markets has allowed Stripe to keep a tight lid on financial details; it has not disclosed revenues or profitability.
However, a person close to the San Francisco-based company said it handles a larger volume of payments than its European rival Adyen, which has a market capitalisation of €60bn and processed €303.6bn in 2020.
Keeping away from the public markets has allowed Stripe to keep a tight lid on financial details; it has not disclosed revenues or profitability.
However, a person close to the San Francisco-based company said it handles a larger volume of payments than its European rival Adyen, which has a market capitalisation of €60bn and processed €303.6bn in 2020.
[deleted]
Is everyone taking a huge dilution hit worth that 'tight lid'?
They are likely profitable and because raising cash is comically easy and cheap right now -- would you turn down $600MM in exchange for <1% of your company?
And when they inevitably do go public, they'll likely have a very pretty balance sheet, with a massive cash war-chest.
Keep in mind that they are a cash-heavy enterprise -- their risk exposure is any company that uses them goes bankrupt and they're on the hook for all the chargebacks.
Their blog post[0] describes some business that aren't allowed, but provides some insight into their exposure:
> We recognized that the private jet market is different and analyzed financial statements, payment flows, customer profiles, and more to fully understand the underlying mechanics of the business. We modeled OpenJet’s business and determined that the credit exposure was within an acceptable range. We engaged our banking partners with concrete financial analysis, put in controls to monitor risk as the company grows, and OpenJet successfully launched on Stripe.
Let's say OpenJet as an example has ~$10MM of annual revenue. Let's liberally assume people don't book flights out further out than 6 months -- so ~$5MM of annual revenue is up in the air, so to speak. If OpenJet goes bust tomorrow, OpenJet's creditors -- including Stripe -- are on the hook for anywhere from $0 to $5MM of outstanding fares that could get charged back.
That's just one business. From TFA:
> Stripe has ridden the wave of ecommerce growth, with more than 200,000 new companies in Europe signing up to the platform since the start of the pandemic. John Collison said it handled almost 5,000 transaction requests a second in 2020.
How many of these companies will go bust? Even if we assume Stripe is profitable, their losses are surely huge and unpredictable, so having a huge pile of cash helps insulate them against market swings and lets them take bigger risks on bigger, possibly riskier customers, which in turn helps them make even more money.
0: https://stripe.com/blog/why-some-businesses-arent-allowed
And when they inevitably do go public, they'll likely have a very pretty balance sheet, with a massive cash war-chest.
Keep in mind that they are a cash-heavy enterprise -- their risk exposure is any company that uses them goes bankrupt and they're on the hook for all the chargebacks.
Their blog post[0] describes some business that aren't allowed, but provides some insight into their exposure:
> We recognized that the private jet market is different and analyzed financial statements, payment flows, customer profiles, and more to fully understand the underlying mechanics of the business. We modeled OpenJet’s business and determined that the credit exposure was within an acceptable range. We engaged our banking partners with concrete financial analysis, put in controls to monitor risk as the company grows, and OpenJet successfully launched on Stripe.
Let's say OpenJet as an example has ~$10MM of annual revenue. Let's liberally assume people don't book flights out further out than 6 months -- so ~$5MM of annual revenue is up in the air, so to speak. If OpenJet goes bust tomorrow, OpenJet's creditors -- including Stripe -- are on the hook for anywhere from $0 to $5MM of outstanding fares that could get charged back.
That's just one business. From TFA:
> Stripe has ridden the wave of ecommerce growth, with more than 200,000 new companies in Europe signing up to the platform since the start of the pandemic. John Collison said it handled almost 5,000 transaction requests a second in 2020.
How many of these companies will go bust? Even if we assume Stripe is profitable, their losses are surely huge and unpredictable, so having a huge pile of cash helps insulate them against market swings and lets them take bigger risks on bigger, possibly riskier customers, which in turn helps them make even more money.
0: https://stripe.com/blog/why-some-businesses-arent-allowed
What is Stripe's moat? It's developer friendly but from my experience management will only care about the cost.
they locked in the bottom up approach. Payments typically isn't something people have deep knowledge about, so management defer to devs to do the research, when that happens devs going to pick the easiest API to work with.
Honestly, I find that a lot of the time it's management picks a payment provider and then devs have to implement it. You don't need to have deep knowledge to know you want to accept payments and how much it'll cost. And if I remember correctly when they entered the market they were all about how much you paid was cheaper and clear than with the big boys who all had a higher barrier to entry.
Think of it this way: there is no opportunity for an new entrant into this market almost globally. Stripe's fee is low enough and its API is super easy to use and the brand is well loved by most ecommerce companies. A new entrant will have to go up against this enormous amount of goodwill that Stripe has accumulated. The only danger to Stripe is if a major bank decides to get into this space. I work for a major bank and let me assure you that the technical expertise , market savvy and wisdom to pull off a new venture like this just doesnt exist in banks.
> there is no opportunity for an new entrant into this market almost globally?
Why is that? Is it something Stripe achieved over time?
Why is that? Is it something Stripe achieved over time?
Low pricing is not a moat.
Why? If you have scale and the cost base that enables you to sustain the pricing profitably in can be very, very difficult for competitors to enter your market.
You’re assuming the low pricing is profitable and in this case it probably is not (and it’s not that low). Stripe’s play here is to upsell premium services.
This is totally wrong, considering Stripe has enormous negotiating leverage.
My employer never bothers switching to any competitor because Stripe match any deal that their competitors present to us.
Could you, a single person and $500m of seed funding match Stripe's prices? Not without hemorrhaging cash.
One of Amazon's moats is low pricing as well, which can only be achieved with eye-watering scale (their margins are 0% in some categories, they make it up by delaying payments to vendors and pocketing the interest).
My employer never bothers switching to any competitor because Stripe match any deal that their competitors present to us.
Could you, a single person and $500m of seed funding match Stripe's prices? Not without hemorrhaging cash.
One of Amazon's moats is low pricing as well, which can only be achieved with eye-watering scale (their margins are 0% in some categories, they make it up by delaying payments to vendors and pocketing the interest).
> considering Stripe has enormous negotiating leverage
What negotiation are you referring to? Interchange pricing is fixed; they are not negotiating discounts on that.
If you mean Stripe has VC funding to be a loss leader then, correct, but that’s not a moat. Moats are what protect profitable businesses. The resultant scale could be a moat but Stripe is still a small slice of the payment processing market.
Their play here is to upsell premium services. Developer friendliness and moderate pricing (it’s actually not that low) are hooks to get in the door of startups.
What negotiation are you referring to? Interchange pricing is fixed; they are not negotiating discounts on that.
If you mean Stripe has VC funding to be a loss leader then, correct, but that’s not a moat. Moats are what protect profitable businesses. The resultant scale could be a moat but Stripe is still a small slice of the payment processing market.
Their play here is to upsell premium services. Developer friendliness and moderate pricing (it’s actually not that low) are hooks to get in the door of startups.
Fun fact: I presented Stripe an opportunity to meet or beat a proposal by Braintree. They countered with a microscopic fee decrease and wanted to lock us into a 2 year deal.
Not only was the offer from Braintree way better, they gave us a better deal on PayPal fees as well.
Stripe’s focus on their supplementary offerings, like Billing (which used to be effectively free) and Checkout show that they’re trying to eat more of the transaction percentage. Try mentioning PayPal button on a Stripe Checkout page and you will be muted from talking in their YouTube broadcast.
Overall, I’m bearish on Stripe and look forward to shorting them on the public market, whenever that day comes.
Not only was the offer from Braintree way better, they gave us a better deal on PayPal fees as well.
Stripe’s focus on their supplementary offerings, like Billing (which used to be effectively free) and Checkout show that they’re trying to eat more of the transaction percentage. Try mentioning PayPal button on a Stripe Checkout page and you will be muted from talking in their YouTube broadcast.
Overall, I’m bearish on Stripe and look forward to shorting them on the public market, whenever that day comes.
I think that's known as pricing discipline! The opposite of chasing business no matter what the margin.
It'll probably go down very well with potential investors.
It'll probably go down very well with potential investors.
Low pricing was Amazon's moat. Then the tech bubble crashed and they had to raise prices. Then AWS came along and pricing for non-AWS services didn't matter a thing as AWS margins were so high Amazon could do whatever it wanted in other business lines.
Not having to charge sales tax was Amazon’s moat.
Prime was and is a genuine moat.
Disagree.
Every ecommerce company and retailer looks at payment fees as money left on the table.
The more money Stripe take on, the more they need to return to investors, and so the more pressure to make margin. That is the opportunity for the future.
I too doubt it would come from a bank, nor from Visa and Mastercard... but could another exist? Yes!
If it came from a big player, I'd be looking at Shopify.
Every ecommerce company and retailer looks at payment fees as money left on the table.
The more money Stripe take on, the more they need to return to investors, and so the more pressure to make margin. That is the opportunity for the future.
I too doubt it would come from a bank, nor from Visa and Mastercard... but could another exist? Yes!
If it came from a big player, I'd be looking at Shopify.
Shopify already has a first party processor, but they are not available to non-shopify customers.
100% agree. Customers do not know or care whether Stripe is being used to process their credit card transactions. There is zero brand loyalty on their side. And merchants absolutely will switch in a heartbeat if there was an existing service with similar ease of use and lower fees.
Think about how much complexity Stripe abstracts away from you as its user. In the US it might seem "simple" in that it's just cards, but each network/acquirer behaves differently enough that even that isn't easy. Now incorporate payment methods that aren't cards -- which are way more popular than cards in other parts of the world. Then think about decoupling the payment method from the geo. And then decouple the pay-in from the pay-out. We're not even talking about their other products at this point, and already it's a pretty complex business.
The fact that we can think "what's so hard about that?" is declaring Stripe's moat without even knowing you did it.
The fact that we can think "what's so hard about that?" is declaring Stripe's moat without even knowing you did it.
One of the sort of conundrums of UX is that the more work you put into it, the easier it looks (because you've simplified it for the user by moving the complexity to the app/service's end of things).
So a shitty UI with a million random buttons looks complicated and hard and users respect it, but an intuitive UI looks so simple and clean it's like the software's barely doing anything!
So a shitty UI with a million random buttons looks complicated and hard and users respect it, but an intuitive UI looks so simple and clean it's like the software's barely doing anything!
I just listened to a podcast with Patrick Collison in which he listed the ways in which Stripe's market seemed unattractive when they started out. Dauntingly complex, highly regulated etc.
Anyone looking to compete with Stripe will have the same thought process and probably won't bother.
And if they do then they will have to execute as successfully as Stripe over an extended period.
Edit: Just to add that the podcast was "The Knowledge Project" [1] - just a fascinating conversation.
[1] https://fs.blog/knowledge-project/patrick-collison/
Anyone looking to compete with Stripe will have the same thought process and probably won't bother.
And if they do then they will have to execute as successfully as Stripe over an extended period.
Edit: Just to add that the podcast was "The Knowledge Project" [1] - just a fascinating conversation.
[1] https://fs.blog/knowledge-project/patrick-collison/
sure that was then, but that changed over the years.
stripe is not cheap, i'm pretty sure if somebody came with the same UX many would switch, us including.
We are B2B and with postpaid so the customers are using Stripe to pay Invoices. There are zero charge backs or fraud but still have to pay high fees.
You'll notice I didn't mention price!
Sure you'd like an identical service to Stripe for a lower fee but the moat is that doing what Stripe does isn't easy at all. You're paying for that fact.
Sure you'd like an identical service to Stripe for a lower fee but the moat is that doing what Stripe does isn't easy at all. You're paying for that fact.
Sure it is not easy, but it is also not impossible. We accepted card payments before stripe came. There are a couple of clones. Most of our customers pay with bank transfer and not online. If we would have all our invoices paid with stripe i'm sure we would try the other solutions.
Don't get me wrong i'm not trashing stripe and they captured huge part of the market that is growing daily. But i'm not sure most people care about stripe, and if somebody else came along people would use the that other provider. In europe a lot of alternative payment methods are popular.
Don't disagree with anything you've said and if your margins are low and volumes are high enough it will be worth trying to shave off some of the fees.
But for a lot (the majority?) of businesses probably want to focus on other things.
But for a lot (the majority?) of businesses probably want to focus on other things.
Stripe has better pricing at volume.
It's expensive when you're small because it's replacing significant engineering resources in a company.
It's expensive when you're small because it's replacing significant engineering resources in a company.
Moat? The payments market is growing. A lot, to say the least. All you need is a small percentage of that and it's still significant.
It's like the soft drink market. You don't have to be #1 or #2 and you can still do quite well.
Stripe might never be on top but it'll print money fairly easily for a long time.
It's like the soft drink market. You don't have to be #1 or #2 and you can still do quite well.
Stripe might never be on top but it'll print money fairly easily for a long time.
That's pretty relevant though: if you're doing large order volume, the "cheaper" option maybe isn't anymore if you need a multiple of the dev effort to build and maintain it, especially if it's all proprietary stuff that you can't really do without specialized consulting firms charging a boatload. I don't think there are any close competitors at the price point and in-house or commodity contractor developer friendliness as Stripe. It's really a fine platform
Time to market, maintainability, and ease of regulatory compliance.
The developer-friendly bit is just a marketing/sales tactic (make the developers swoon to force the hand of co's to implement it).
The developer-friendly bit is just a marketing/sales tactic (make the developers swoon to force the hand of co's to implement it).
I don't think any reply to this comment mentioned Stripe's actual moat: vertical integration between their products.
HN loves Stripe's Payments API, but in my experience from having worked on payments at a large ecommerce unicorn, APIs from companies like Adyen and Checkout.com are just as easy to work with.
Stripe's real moat is that they offer so many useful products around payments and finance that integrate really well. You can get fraud detection, billing, invoicing etc. from other merchants, or you can build your own, but it's probably cheaper (and much simpler) to use Stripe for all of that.
At the moment this is true from small to medium sized companies. Past a certain size you will most likely be using multiple Payment Service Providers anyway, so the vertical integration is not as useful.
HN loves Stripe's Payments API, but in my experience from having worked on payments at a large ecommerce unicorn, APIs from companies like Adyen and Checkout.com are just as easy to work with.
Stripe's real moat is that they offer so many useful products around payments and finance that integrate really well. You can get fraud detection, billing, invoicing etc. from other merchants, or you can build your own, but it's probably cheaper (and much simpler) to use Stripe for all of that.
At the moment this is true from small to medium sized companies. Past a certain size you will most likely be using multiple Payment Service Providers anyway, so the vertical integration is not as useful.
So Ayden is valued at 100 times revenue. Per the article Stripe is bigger than Ayden and growing faster, so Stripe must be worth more than 100 times revenue and less than 95000/684 = 138 times revenue. So comparatively to Ayden their valuation seems cheap (or they are not bigger than Ayden)
valuation should not increase linearly based on revenue. the market winner will eventually get the lions share
in credit card processing fees? there aren't many barriers to entry? Even Square is in on the game.
Particularly interesting that the Irish sovereign treasury is co-leading this round.
am i the only one that thinks fintech is massively overvalued? especially square etc, or anything adjacent. sure they have great growth and revenue but i don’t see any path where profit can justify the value
The main value for Stripe is not in the payments processing itself (I would estimate they take about 0.2% from TPV as fees). The main value is the add on services, and in particular short term loans to SMBs secured by incoming payments. Overall, Stripe is a strong and successful business with room to grow. Is >100x P/E justified? Probably not from pure financial perspective. However if you take into account “hype” then the price is about right.
It's not e.
You aren't the only one. That being said, the markets they play in will probably end up bigger than you might expect. Plus, the competition is pretty bad. Stripe has a good number of people who have 20 iq points + more ambition when compared to the equivalent person working at a competitor.
> Stripe has a good number of people who have 20 iq points + more ambition when compared to the equivalent person working at a competitor.
Lmao. Is that some kind of Poe's Law? Can't believe someone would say anything like this seriously.
Lmao. Is that some kind of Poe's Law? Can't believe someone would say anything like this seriously.
I meant it seriously. Stripe is a payments company - it's not super exciting stuff. With few exceptions the competition are legacy providers which don't attract extremely smart, ambitious people. Just as some examples: Stripe have a good number of formerly high ranking google folks on the engineering side, a good number of former Goldman people etc on the finance side, and the Collisons are freakishly smart guys, especially for their age.
I see as fintech overvalued, not because it's hype or a bubble, but because an already pre-existing part of society had a disproportionate amount of value extracted from it by the financial sector in general.
As these companies eat into traditional banking, even if they halve or quarter the overall market cap through disruption, it remains an obscene amount of money. Except it's more monopolized into a few dozen global tech companies who can execute than what used to be a market of tens of thousands of banks, insurance, stock brokers etc.
As these companies eat into traditional banking, even if they halve or quarter the overall market cap through disruption, it remains an obscene amount of money. Except it's more monopolized into a few dozen global tech companies who can execute than what used to be a market of tens of thousands of banks, insurance, stock brokers etc.
Fintech (And indeed Stripe, Square and Plaid in particular) are grossly overvalued. They all play the hype game, with statement such as "Stripe powers the internet". Way too many people are buying into those valuations without looking at the fundamentals.
I really really wish I could invest in Stripe as a retail investor :(
Sadly, the US locks out all but the wealthiest decile or so from the best investment opportunities.
The huge exception this past decade has been crypto.
The huge exception this past decade has been crypto.
How is stripe not bigger than PP.. i swear few people use pp these days
Paypal is a different type of payment option. If I pay via paypal my details are hidden from the store.
If I type in my credit card on the site they might use stripe or evopay or something else I wouldn't know either way. My details are save on the site.
On digitalocean you can pay via credit card or paypal. If you pay via credit card they take money out for service automatically. If you use paypal you manually buy the amount if credit you wish.
Different markets...
If I type in my credit card on the site they might use stripe or evopay or something else I wouldn't know either way. My details are save on the site.
On digitalocean you can pay via credit card or paypal. If you pay via credit card they take money out for service automatically. If you use paypal you manually buy the amount if credit you wish.
Different markets...
Stripe blocks some people who then have to use PayPal, also PP has been around for 20 years and expanded beyond payments, like what Stripe will be doing going forward.
Why aren’t companies going public sooner now? So much of the medium term upside is gone by the time they IPO and the stock then gets hammered in the markets.
I'm building a non-profit and Stripe fees eat into donations. Are there any good Stripe alternatives out there?
The underlying issue is credit cards have interchange fees, which aren't going away anytime soon. PayPal offers a slightly lower transaction rate to non-profits (https://www.paypal.com/us/non-profit/fundraising/fundraising...) and Stripe appears to have similar (no rates disclosed; https://support.stripe.com/questions/fee-discount-for-nonpro...) but you're not gonna get to zero with anyone.
There's always accepting checks and cash. Or ACH payments, but each of these will probably cause drop-off in people who'd prefer to use a CC.
I would tend to expect that the ease of donating via CC readily outweighs the fees you'd save by ditching it. I've seen a few charities have a checkbox on the form that says something like "processing this costs us 3%; will you add that much to cover it?"
There's always accepting checks and cash. Or ACH payments, but each of these will probably cause drop-off in people who'd prefer to use a CC.
I would tend to expect that the ease of donating via CC readily outweighs the fees you'd save by ditching it. I've seen a few charities have a checkbox on the form that says something like "processing this costs us 3%; will you add that much to cover it?"
We don't expect to get zero fees from any payment processor, we're just at the crossroads of developer convenience and making sure each dollar is maximized, so we're leaning towards discriminating on cost in this case.
Did some research a while ago, I believe the Stripe nonprofit fee is unofficially 2.2% + $0.30 on the first 15k/yr, but they may negotiate with you to find something in between that and standard.
You do, of course, have to pay Interchange fees no matter what, there's no way to get to 0-fee with a card payment.
You do, of course, have to pay Interchange fees no matter what, there's no way to get to 0-fee with a card payment.
Stripe can oftentimes lower fees for nonprofits (https://support.stripe.com/questions/fee-discount-for-nonpro...). Email [email protected] and CC [email protected]—we’d be happy to chat.
Make it clear where to send checks on your donation page - and encourage people to use their bank’s bill pay. Usually free to them and to you.
What would a non profit need to communicate externally for people to make bank transfers directly into their accounts? Does bill pay require a routing number to setup or anything like that? What are the prerequisites for setting that up?
In the US a postal address is literally all you need.
I believe in EU it is common to give a routing and account number though I think that is setup to allow input only.
I believe in EU it is common to give a routing and account number though I think that is setup to allow input only.
Accepting checks is not free, there is a lot of manual labor that goes into depositing them. I believe jxramos was looking for an electronic solution, such as Zelle.
right, I'm talking about electronic transfer, mail you just need the address and who to write the check out to.
Good idea, thanks.
Are you already getting the non-profit discount from Stripe? Any processor will cost you something if you take credit card donations.
If you email them, they will usually give you a rate of around 2.7% for VC/MC and 3.9% for Amex
Sounds risky; Stripe's standard rate for Amex is 2.9%.
Yes, because according to published information, all Stripe Amex transactions are at a loss.
I really doubt that. Amex and Visa/MC interchange rates have converged substantially over the last decade - Visa in particular is now more expensive than Amex on their Visa Infinite interchange rates IIRC.
https://thepointsguy.com/news/amex-now-accepted-in-as-many-p...
> There is now little cost difference between Amex and other card networks today — Nilson reports only a .04% difference between Amex and Visa and Mastercard (2.3% vs. 2.26% respectively).
> Amex attributes this shift in part to its OptBlue program. This initiative began in 2014 and provides a way for small businesses to accept Amex cards through a third-party processor (so long as that processor is partnered with Amex).
Stripe is one of those OptBlue processors listed on https://www.americanexpress.com/us/merchant/optblue.html.
https://thepointsguy.com/news/amex-now-accepted-in-as-many-p...
> There is now little cost difference between Amex and other card networks today — Nilson reports only a .04% difference between Amex and Visa and Mastercard (2.3% vs. 2.26% respectively).
> Amex attributes this shift in part to its OptBlue program. This initiative began in 2014 and provides a way for small businesses to accept Amex cards through a third-party processor (so long as that processor is partnered with Amex).
Stripe is one of those OptBlue processors listed on https://www.americanexpress.com/us/merchant/optblue.html.
I've heard good things about Donorbox.org but haven't used them personally
DonorBox is great, but non-profits pay a DB fee of 1.5% on top of Stripe's fees (which can be discounted to ~2.2% if you ask).
At the end of the day someone has to pay the interchange fees.
Sure, but not necessarily the ridiculously high ones. You could just cap them to a reasonably low percentage. In the EU it's 0.3% on credit cards and 0.2% on debit cards.
Edit: This is also reflected in Stripe's pricing. They charge EU customers 1.4%+25ct on EU cards and honestly you can go lower. Adyen does Interchange++ and 10ct, which if you're not a big customer probably works out to around 1%+10ct.
Edit: This is also reflected in Stripe's pricing. They charge EU customers 1.4%+25ct on EU cards and honestly you can go lower. Adyen does Interchange++ and 10ct, which if you're not a big customer probably works out to around 1%+10ct.
"you could just cap them" = (legislation could be enacted which capped them || banks could agree to reduce them).
Neither is especially likely at this point in the US.
Neither is especially likely at this point in the US.
I agree banks have very little incentive. I was thinking of legislation, even if the US is unlikely to enact it. I just wanted to point out it's not an inherently unsolvable problem.
no. target richer people like the rest of us do.
I hope stripe allows early adopters to get in on their ipo whenever that happens
How much wealth creation - to people with access only in the public markets - could this company have created if it were publicly traded? The previous generation had great wealth building ability in being able to invest in companies that were growing rapidly in the public markets at a very early stage (think MSFT, INTC, etc.); today too much of this is done in a way that the vast majority of people cannot be part of.
There is a complete disconnect between regulations in the public and private markets. Regulations that make great companies like Stripe pause on going public need to be reassessed.
There is a complete disconnect between regulations in the public and private markets. Regulations that make great companies like Stripe pause on going public need to be reassessed.
Wow. It takes a lot of money to take on the PayPal monster huh? Incredible.
Well, and I could be wrong. Paypal was able to be basically a bank without having to follow any of the rules of what a bank needed to follow.
Sorta like Uber being a taxi service without having to follow any of the rules of a taxi service.
My guess is it's very expensive to beat someone who has already broken the rules to get to where they are before the rules caught up to them.
Sorta like Uber being a taxi service without having to follow any of the rules of a taxi service.
My guess is it's very expensive to beat someone who has already broken the rules to get to where they are before the rules caught up to them.