Irish entrepreneur brothers John and Patrick Collison founded Stripe in Palo Alto, California, in 2010.
Patrick Collison is chief executive officer and co-founder of Stripe, a technology company that builds economic infrastructure for the internet. After experiencing firsthand how difficult it was to set up an online business, Patrick and his brother John started Stripe in 2010. Their goal was to make accepting payments on the internet simpler and more inclusive. Today, Stripe powers millions of online businesses around the world.
John Collison is president and co-founder of Stripe, a technology company that builds economic infrastructure for the internet. John and his brother Patrick Collison started Stripe in 2010 while John was studying physics at Harvard. Their goal was to make accepting payments online simpler and more inclusive, after learning how difficult it was firsthand. Today, Stripe powers millions of online businesses around the world.
Patrick and John were raised in the small Irish village of Dromineer by a family of scientists. Their father was an electronic engineer, and their mother was a microbiologist.
Patrick dropped out of high school in 2007 to attend MIT. He enrolled based on an SAT he took when he was only 13 years old!
At the time, his younger brother, John Collinson, was only 15 years old and on his way to accomplishing great things as well. He passed the Irish Leaving Certificate exam with 8 A1 and 2 A2 grades. In September 2009, he began classes at Harvard University. John is a pilot as well as a pianist.
And in 2007, the two Collison brothers launched their first startup together, Automatic, a SaaS platform for eBay power sellers to track inventory and traffic. That year they joined Y Combinator (YC), and within just 10 months of incorporating — they were acquired for $5M.
Before Live Current Media acquired it for $5M, this Y Combinator-funded startup operated for 10 months. By 2008, John had emerged as Ireland’s top high school student, earning the highest score on his Irish Leaving Certificate, and Patrick had been promoted to the position of Director of Product Engineering at Live Current Media at 19 years old.
Patrick would have his hands full at this point, trying to figure out how to be a director and all. But no, he actually had a bunch of small side projects.
Elon Musk, Peter Thiel and Max Levchin founded PayPal in 1998, which was bought by eBay in 2002 for $1.5 billion. The fintech ‘revolution’ that followed, however, wasn’t much of an uprising but more of a spot of portfolio diversifying by some banks that laid down the payment rails any eager startup had to ride on. The banks still verified identity and owned the account for cards and payments drew from.
For years, the growth in e-commerce outpaced the underlying payments technology: companies wanting to set up shop had to go to a bank, which processes payments, and setup a gateway to connect the two. This takes weeks, lots of people, and fee after fee. Much of the software in place was decades old and written by banks, credit-card companies and financial middlemen.
PayPal – designed to simplify payments – actually made this worse. The company infuriated startups with its restrictions – once turnover hit a certain level, PayPal automatically put the business on a 21 to 60 day rolling reserve, meaning that up to 30 per cent of a company’s revenue could be locked up for up to two months. Developers had to choose between this and complex legacy systems built by banks. — Stephen Armstrong via Wired
Patrick noticed this problem and began to wonder why it was so difficult to accept payments on the web. John agreed.
For us it was quite visceral: these payment products are not serving the needs of the customers, so let’s build something better.
In old-fashioned legacy companies it’s the CFO choosing the payments system. They think all systems are alike, so they just sort the bids from suppliers. But if you’re a developer building the next Kickstarter, or the next Lyft, and you have a two-person team, both of you writing relatively complex code and solving complex infrastructural problem, you need a simple payments API that – once installed – doesn’t keep changing. — John Collison, co-Founder and CEO
So, they began refining the idea of solving online payments, to see if it was possible to make it simple — really simple. And in 2010, they came up with seven lines of code that anyone can insert into any app or website in a day to connect to a payment company.
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- Seed Round: From Y Combinator in August 2010
- Seed Round: In 2011, Stripe held a $2 million seed funding round led by Sequoia Capital.
- Series A: In February 2012, the Series A from Sequoia Capital was worth $18 million.
- Series B: Sequoia Capital, Redpoint Ventures, Founders Fund, and others invested $20 million in July 2012.
- Series C: January 2014 was a Series C for $80 million.
- Series C: Investors added $70 million more in December 2014.
- Series C: Stripe raised another $100 million in July 2015.
- Series D: In November 2016, Stripe raised another $150 million. Leading this investment round were CapitalG and General Catalyst.
- Series E: The company’s Series E took place in three steps starting in September 2018. Proioxis Ventures Fund, Tiger Global Management, and others brought in $345 million.
- Series G: Stripe conducted a dual-part Series G funding round starting in September 2019. Andreessen Horowitz, General Catalyst, and others brought in $850 million.
- Venture Round: They raised $1 million in May 2020.
- Series H: Stripe underwent a $600 million funding round that brought the company’s pre-money valuation to $94.4 billion.
- Venture round: They received an undisclosed amount in June 2021.
- July 14, 2022: Stripe slashed the internal value of its shares by 28%, lowering its value to $74 billion.
Source Stripe IPO: What you need to know about the public offering in 2022
- Number of Funding Rounds: 21
- Number of Lead Investors: 14
- Number of Investors: 51
- Total Funding Amount: $2.2B
|Date|Type|$ Raised|Valuation|# of Investors|Lead Investors| |---|---|---|---|---|---| |2010/8/2|Pre Seed Round|—||—|1|Y Combinator| |2011/3/28|Seed Round|$2M|—|6|—| |2012/2/9|Series A|$18M|$182M|5|Sequoia Capital| |2012/7/9|Series B|$20M|—|9|General Catalyst| |2013/6/18|Venture Round|—|-|1|Heavybit| |2014/1/22|Series C|$80M|$1.7B|—|4|Founders Fund| |2014/12/2|Series C|$70M|$3.4B|—|7|Thrive Capital| |2015/7/31|Series C|$100M|—|9|—| |2016/11/25|Series D|$150M|$9.1B|5|CapitalG, General Catalyst| |2017/3/28|Secondary Market|—|—|3|—| |2018/9/26|Series E|—|—|1|—| |2018/9/27|Series E|$245M|$19.8B|5|Tiger Global Management| |2019/1/1|Venture Round|—|—|1|—| |2019/1/29|Series E|$100M|$22.4B|1|Tiger Global Management| |2019/7/1|Secondary Market|—|—|1|—| |2019/9/19|Series G|$250M|$35B|3|Andreessen Horowitz, General Catalyst| |2020/4/16|Series G|$600M|$35.4B|5|—| |2021/3/1|Secondary Market|—|—|1|—| |2021/3/14|Series H|$600M|$94.4B|7|Allianz X, AXA Group, Baillie Gifford, Fidelity Management and Research Company, National Treasury Management Agency (NTMA), Sequoia Capital| |2021/6/1|Venture Round|—|—|1|—| |2022/8/1|Secondary Market|—|—|1|—|
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Rumor Jan 11 (The Information) - Stripe has cut the internal value of its shares by about 11%, implying a valuation of $63 billion, according to a person familiar with the matter. Stripe Cuts Internal Valuation by 11%, Implying $63 Billion Valuation Feb 24 (Reuters) - Digital payments processor Stripe Inc is close to raising $4 billion in fresh capital at a valuation of about $55 billion, people familiar with the matter said. Stripe in advanced talks to raise $4 bln from investors - sources
Since its founding in 2010, Stripe has experienced significant growth. Originally created as a tool for developers to build and accept payments within their applications, the company has since expanded to offer a variety of services for businesses, including billing and fraud detection. Stripe has also expanded its global presence, now operating in over 70 countries as of 2022.
To start, Stripe just wanted to make it easier and faster to implement API. They were just trying to figure out if this approach resonated with their target customers. This is called a Wizard of Oz MVP.
Initially, it was very much spread through a word-of-mouth process. That was surprising to us because it’s a payment system, not a social network so it’s not something you’d think would have any virality whatsoever. But it became clear that everything else was so bad and so painful to work with that people actually were selling this to their friends. — Patrick Collison, via Techzing Podcast
Patrick and John decided to price Stripe during Beta at the most expensive. They charged 5% +$0.5 when all their competitors were charging 2.9%-3.2% + $0.3. So, as they were gathering feedback from the right people and making their product better— more and more people spoke about Stripe because they made something customers needed to do really easy. Developers typically have high standards, and they talk to one another. And Stripe exceeding those standards led to continued word-of-mouth growth.
Following the website launch, they put a lot more energy into acquisition and started creating a community of devs around the product. Here are a few key things they did that bolstered their word-of-mouth engine.
- They hosted monthly Capture The Flag hackathons at their offices. This eventually became so popular they took it online.
- They started hosting general meet-ups for developers and hackers across the country — basically wherever Patrick and John traveled to.
- They started running ads on Stack Overflow. For the first year, that was the only channel they used for paid marketing.
- They spent a lot of time building dev tools like the clear and detailed documentation. For developer-focused products, well-written documentation is one of the most important assets that create a great experience, saves devs' time, and earns appreciation — which all further fuel word-of-mouth growth.
At this point in the game, for their core Payments product, they had already locked on their key customer, persona, problem, and solution for solving traditional e-commerce payments.
In late 2011, they launched Stripe Connect, their second core payments product that opened them up to two massive use cases.
With Stripe Connect, they aimed to bring that same elegance to businesses that are doing more than simple one-way transactions, like onboarding their own sellers, simplifying compliance, and managing global payouts. They started building platforms (like Shopify) and marketplaces (like Etsy).
Like Stripe’s first product, Payments, the Connect product was quick to establish product market fit. That is because Stripe did not just go to market haphazardly. It spent six months in production testing the product. It iterated from learnings, for example allowing customers to add optional fees, as well as adding donations in SubReddits.
Fast forward to today, and Connect is estimated to be one of Stripe’s biggest revenue drivers. Take Shopify, which has done about $80B in payment volume over the last twelve months. At a 2.5% take rate, and 38% gross margin for that segment, we can estimate Stripe received $1.2B in revenue from Shopify. — Aakash Gupta, via Product Growth
The powerful part of Stripe Connect is that by building out payments for an e-commerce platform like Shopify, they are able to piggyback on Shopify’s incredible growth.
In 2014, Stripe became a billion-dollar company. At this growth milestone, lots of companies would prioritize expanding their product. Stripe didn't, they focused on making their foundational services the best product experience for years. Documentation became better, integration became faster, and ultimately developers came to love these APIs even more. They didn’t get distracted by new products, and today, choosing Stripe is a complete no-brainer because the core problem is basically perfectly solved.
Stripe works. Not only that, but it does so with an elegance that can only come from obsessive devotion and exacting standards. From design to functionality, every aspect of Stripe’s suite seems to have been worried over, honed, polished. Indeed, one of Stripe’s values is to “really, really care.” — The Generalist
With their two core products, Payments and Connect, they were covering most types of internet businesses’ core payment needs. Their product for subscription businesses (Billing) would only come much later in 2018.
One of the factors contributing to Stripe's growth has been its emphasis on user experience and developer-friendly APIs. The company's platform is recognized for its ease of use and integration capabilities, which has helped it amass a loyal following among developers and businesses. In addition, Stripe has made significant investments in product development, continuously introducing new features and services to its platform.
Stripe believes that the open internet has created an opportunity to bring businesses and consumers closer through technology. There will certainly be growing demand for online payments due to rising e-commerce purchases on Amazon, eBay, and Alibaba.
Stripe did face some early challenges with regulatory compliance. In 2014, Stripe briefly suspended its services in the UK after running afoul of banking regulations. Fortunately, the company quickly resolved the issue and was able to resume operations in the UK soon after.
2020 was a golden year for Stripe. Due to the pandemic, many offline businesses went online, resulting in a 70% growth of Stripe’s revenue to $7.4 billion.
July 14, 2022, Stripe told employees in an email that the internal share price was about $29, compared with $40 in the previous internal valuation, known as a 409A valuation. The move lowered the implied valuation of those shares to $74 billion. In the email that the board approved the lower share price effective June 30. The payments processor to startups and fast-growing internet companies didn’t explain the decision to lower its internal valuation.
The shares of publicly-traded fintech companies have plummeted in the first half of 2022, making Stripe look overvalued. Payments processor PayPal Holdings Inc., which investors often compare to Stripe, has seen its stock decline by over 60% since Jan. 1, 2022.
November 3, 2022, Stripe is laying off roughly 14% of its staff, CEO Patrick Collison wrote in a memo to staff. Collison said the cuts were necessary amid rising inflation, fears of a looming recession, higher interest rates, energy shocks, tighter investment budgets, and sparser startup funding. Taken together, these factors signal “that 2022 represents the beginning of a different economic climate,” he said.
In Stripe's view, they made two very consequential mistakes,
- They were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.
- They grew operating costs too quickly. Buoyed by the success they are seeing in some of our new product areas, they allowed coordination costs to grow and operational inefficiencies to seep in.
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Stripe, a service and software as a service (SaaS) company, allows businesses to accept and make payments over the internet, and to be the financial infrastructure for the internet.
- Payments
- Online payments
- Billing: create and manage subscriptions and recurring revenue.
- Invoicing: create and manage invoices for one-time payments with Stripe Invoicing.
- Terminal: use Stripe Terminal to accept in-person payments and extend Stripe payments to your point of sale.
- Connect: learn how to route payments between multiple parties.
- Prebuild Components
- Payment links: sell online without building a digital storefront.
- Check out: use a low-code integration to build a customized payment page, hosted on Stripe.
- Elements: create your own checkout flows with prebuilt UI components.
- Business Operations
- Radar: fight fraud with the strength of the Stripe network.
- Sigma: access data and generate custom reports for charges, refunds, disputes, and more with Sigma.
- Data pipeline: access data in your data warehouses and sync your Stripe account with Snowflake or Amazon Redshift.
- Tax: calculate and collect sales tax, VAT, and GST automatically on your Stripe transactions—low or no code integrations available.
- Atlas: start a US company from anywhere in the world using Stripe Atlas.
- Identity: learn how to verify identities using Stripe Identity.
- Revenue recognition: automate your accrual accounting process with Stripe Revenue Recognition.
- Climate: get answers to common questions about Stripe Climate.
- Financial Services
- Issuing: an API for businesses to instantly create, manage, and distribute payment cards.
- Capital: get answers to common questions about Stripe Capital.
- Treasurly: Learn about the Stripe Treasury API. (a banking-as-a-service API that lets you embed financial services in your product.)
- Financial connections: Learn how to collect accounts to access data such as balances, ownership details, or transactions with your users’ permission.
It’s clear that from 2016-ish onwards, Stripe really accelerated innovation on their platform. They have taken their product beyond payments (a commodity business) to a full set of tools that make it easy to start and run an online business. They’ve done this by leaning into their customer relationships and the massive amount of data they get, and have built out an ecosystem of higher-margin products that they upsell to both ends of the market, such as:
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Radar — fraud and risk management. Because Stripe has so much data, they are better able to prevent fraud and prevent legit customers from being flagged as bad actors. This is huge for all types of customers but is table-stakes for enterprises.
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Atlas — company incorporation. Atlas makes it easy for companies anywhere in the world to establish a Delaware (US) corp, open a bank account, and get setup with Stripe’s infrastructure. This locks in global startups and operates as an advance guard for geographical expansion — i.e even if Stripe can’t offer payments to entrepreneurs in South Africa, it can still establish a relationship via Atlas, promising a degree of inbuilt demand when the country goes live. This shows Stripe heading even further down the market to build for startups at the point of inception.
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Sigma — customer reporting. This lets users pull rich insights directly from their own Stripe data instead of having to purchase Looker or another data analytics tool.
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Corporate Card — issuing company credit cards. Stripe automatically provides limit increases to virtual and physical cards based on growth and offers rewards aimed at startups and engineers.
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Capital — loans for growing businesses. Stripe is able to see their customers’ revenue from the Payments side and costs from the Corporate Card side, and gives them access to capital based on what their delta looks like between them.
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Treasury — banking-as-a-service. With one integration, Stripe’s customers can enable their own users to hold funds, pay bills, earn yield, and manage their own cash flow.
Adding adjacent products like Atlas or Radar is a powerful strategy. Fast forward to today, and 94% of enterprise customers use multiple Stripe products. One can imagine a customer starting with Atlas, going to payments, then adding Radar as they grow. This is an arc of using Stripe to grow. It allows Stripe to double the compounding: growth of the client with growth of the share of wallet. — Aakash Gupta, via Product Growth
Bloomberg Businessweek published a feature story on Stripe. Four words spanned the center of the cover: “seven lines of code,” suggesting that’s all it took for a business to power payments on Stripe. Abstracting away the complexity of payments has driven the evolution of our APIs over the last decade. The following milestones show how Stripe has grown around and beyond those seven lines.
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Supporting card payments in the US (2011-2015)
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Make Something Your Customers Need to do Easy, 2010
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Don’t Jump Into Big Marketing & Sales Spend, 2011 Instead of going the marketing/sales route, or the hybrid route, Stripe chose product growth as its strategy. According to Chief Financial Officer (CFO) and Chief Product Officer (CPO) William Gaybrick, the sales team was “diminutive,” and they only had 1 marketing person. Most SaaS companies establish a large outbound sales motion after raising at a $20M valuation. Not Stripe.
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Build for Platforms and Marketplaces, 2011
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Go Deep to Solve Problems Well, 2014
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Start With Startups, Move Upmarket, then Build for Everyone Over time, Stripe using startups did quite well, making a lot of noise about their use of Stripe. Stripe began selling to bigger and bigger clients. Stripe found that old-world businesses like Harris Teeter and LVMH (the luxury brand worth $400B) “increasingly see they need the same technology that helps startups move so quickly.” Overall, Stripe made the normal disruption jaunt from startups to enterprises.
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Adding ACH and Bitcoin (2015)
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Seeking a simpler payments API (2015 - 2017)
- Launch New Products When the Time is Right, 2015
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Designing a unified payments API (late 2017 - early 2018)
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Introducing PaymentIntents and PaymentMethods (2018)
- Define a North Star, 2018 Stripe shared exactly that with its 2018 Conference Keynote. Stripe began calling itself a “Global Payments Treasury Network” (GPTN).
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Launching PaymentIntents and PaymentMethods (2018 - 2020)
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Go Offline to Enhance the Flywheel
Building products to help merchants offline helps them grow, which helps them buy more from Stripe. Take Stripe’s client, HomeCall Pro. They started using Stripe on their website. But after Stripe released Terminal, they integrated that product in their day to day operations of doing in-person house repairs. This increased Stripe’s share of wallet and simplified backend payments infrastructure for HomeCall Pro.
This flywheel works for many of Stripe’s customers. The strategy of going online is a common one in ecommerce. We see this with Warby Parker and Casper among the direct to consumer brands, as well as thredUP amongst the marketplaces. Offline stores can act as stationary billboards, enhancing online customer acquisition. The same logic applies for offline activities of Stripe’s millions of customers.
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Scale Geographically, 2021~present Stripe also uses the lever strategically. Atlas is Stripe’s market-testing product. Atlas is available in 140 countries. Payments are available in only 44 countries. The Generalist called this Stripe’s, “advance guard for geographical expansion.” The strategy is to take a lower-development product to market first, to test the size and interest.
- Higher margin products ⇒ more money ⇒ growth
- New products ⇒ new personas + solving new problems ⇒ growth
- An ecosystem ⇒ moats ⇒ customer lock-in ⇒ retention + growth
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Stripe developed into a platform that helps businesses easily credit and accept payments on any website or app. It allows them full control over the payment form using dashboards, allowing adding features or building forms. And continues to develop its technology for mobile devices and apps, integrating with existing hardware via plug-ins that do not require additional software or programming expertise. Their full-stack offering ranges from backend cloud infrastructures over a customizable payments platform up to dedicated applications for tasks such as billing or reporting.
Revenue Model
- Stripe Connect (developer tools)
- Becoming an ecosystem with Stripe Connect
- Stripe’s first set of APIs created the easiest way for e-commerce merchants to accept payments and move money around globally.
- Like Stripe’s first product, Payments, the Connect product was quick to establish product market fit. That is because Stripe did not just go to market haphazardly. It spent six months in production testing the product. It iterated from learnings, for example allowing customers to add optional fees, as well as adding donations in SubReddits. Fast forward to today, and Connect is estimated to be one of Stripe’s biggest revenue drivers. Take Shopify, which has done about $80B in payment volume over the last twelve months. At a 2.5% take rate, and 38% gross margin for that segment, we can estimate Stripe received $1.2B in revenue from Shopify. — Aakash Gupta, via Product Growth
- Stripe Terminal (iOS card readers)
- Stripe Radar (real-time fraud detection)
- Charge API
- Stripe.js (a mobile payment processing service)
Stripe makes money by taking a percentage and fixed-fee cut on every facilitated payment. The company uses different price packages depending on the selected products. Stripe also offers a service "Captial" which allows Stripe customers to borrow money directly from the company. Stripe generates revenue through the interest it charges on these loans.
While Stripe does not publicly disclose its revenues, has claimed to be processing over $200 billion in transactions annually. Between its SME and Enterprise accounts, Stripe charges a fee of about 2 percent – putting the company’s annual revenue at roughly $4 billion.
- Strengths
- Strong Global recognition
- Strong developer community
- Strategic partnerships
- Backed by Worthy Investors
- A strong engineering team that has built a robust platform
- Extensive clientele, including many major brands
- Good reputation for security and reliability
- Portfolio
- Customer Database
- Weaknesses
- High Costs per transaction
- Dependence on major credit card companies and banks
- Lack of brick-and-mortar locations
- Opportunities
- Plans to go Public
- Growing E-Commerce Sector
- Expansion into new markets, such as Asia and Latin America
- Product range
- Threats
- Highly Competitive Market
- Increased regulation of the financial industry
- The global economic downturn
- Ignoring ordinary(retail) customers
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Go deep on your customers
At any given time, especially when we were smaller, Patrick could ask about a particular deal you were working on, and he knew about that company and how they should be using Stripe. He took the time to actually be plugged into the technology and the products and the business. — The Generalist, Stripe
People on their product team have described user research as part of the job of “every team across Stripe,” because it is “a part of literally every part of product development.” When you’re laser-focused on a persona (developers), it becomes easier to establish deep empathy for them, develop a true understanding of who they are, and go deep on their pain points and motivations.
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Take on complexity Stripe also went deep by taking on complexity. They continued to add complexity in the back end of these products, like Machine Learning, more country support, and currencies. As they solved complexities, they continued to keep it dead simple for developers. All their APIs, for example, are backward compatible. This means that as Stripe’s customers ship new work to their own customers, nothing should stop working.
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Add scale While a simple problem to define, performance is a complicated one to solve. But Stripe went deep on this front and now has a ~99.999% uptime over Black Friday and Cyber Monday. For a company that handles ~200 billion API requests in a year, that’s phenomenal.
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Speed Stripe went deep by moving fast. Being deep does not mean moving slowly. Actually, Stripe is explicitly focused on speed. As John Collison explains, “speed is of the essence, and a defensible trait in companies.” Stripe publishes updates to its core API 16 times per day.
The company is especially dedicated to moving very, very fast. That urgency comes from Co-founder and CEO Patrick Collison who even has a page on his website dedicated to fast projects in history, ones that were unreal and unreasonably quick.2 That has really permeated the Stripe culture.
Their marketing strategy is credited for their tremendous growth since their launch in 2010 which took them to $36 billion growth in less than 10 years.
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TA Centric Content Marketing The marketing strategy of Stripe goes beyond the simple tactics of content marketing. They make sure that their content delivery is only after a thorough study of the target audience. These audiences are not just the customers, but also the developers.
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Maintaining Contact with Audience One of the most important initiatives of Stripe with regard to the marketing strategy is their Stripe Sessions which enable them to connect with users directly.
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Niche Marketing It is a classic marketing strategy of Stripe. They are aware that their primary customers are developers and hence Stripe markets their products, especially for the developers.
They inserted themselves as the tollbooth for every single cent moved through all of Shopify’s network of merchants.
The reason that building infrastructure for platforms and marketplaces was such a strategic move is best captured by Paul Graham: "A startup that helps people make money will make money itself. Both Viaweb and Y Combinator did this. And so do Airbnb and Stripe. It's not the only recipe for a startup, but it's a good one".
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Strengthening Brand Loyalty Their blog posts and content are heavily driven by a strong desire to build brand loyalty and recognition. They create an impression where Stripe becomes the dream company for all the developers to who they market the product.
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Consistency of Product Development They have been consistent and efficient in launching the right product at the right time. Unmatched by their rivals, Stripe’s products are beyond payments. Their programmable infrastructure for the global money movement called Global Payments and Treasury Network (GPTN) is an example.
Platforms help people make money. Stripe helps platforms. Shopify is not Stripe’s only big platform or marketplace customer. Stripe also has names like Lyft and WordPress on the list. Stripe grows as these customers grow. This is how Stripe accomplishes its mission of building out the infrastructural rails for the internet. If Lyft and WordPress are building out the roads, Stripe is supplying the cement. — Aakash Gupta, via Product Growth
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Blogs and Other Social Media The CEO of Stripe himself has agreed on the role of writing in their marketing in their initial days. They have a well-kept blog which is a very important channel for communication. They have also published various books on the topics that their firm addresses like economics and technology. They also have Stripe Guides which have been instrumental in retaining customers.
Stripe’s strategy is built to compound the impact of a growing internet economy over a long time horizon. So, a huge part of this strategy relies on creating powers so that customers don’t switch to a competitor before becoming more profitable.
A 2018 IDC survey found that companies using Stripe’s payments platform reported a 24% lower operational cost relative to traditional online payment processing. That figure more than doubled for companies processing more than $5M per year. On top of that, customers saw an average of 6.7% higher revenue by running on Stripe.
A framework comes from “7 Powers: The Foundations of Business Strategy”, by Hamilton Helmer. The book argues that there are seven powers that a business can leverage to make itself “enduringly valuable.”
The book has a bunch of case studies that show us companies that use 1/2 of these powers to sustain their advantages.
- Netflix takes advantage of (1) scale economies and (2) counter positioning.
- Facebook and LinkedIn build (3) network effects.
- Oracle has high (4) switching costs.
- Tiffany’s has a powerful (5) brand.
- Pixar’s “Brain Trust” is a (6) cornered resource.
- Toyota’s Toyota Production System demonstrates (7) process power.
Stripe has all 7 of them
Let's go into the brand, how have they built the brand so well?
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Having great taste that appeals to a broad range of people. Their website has always been clean and presented beautifully and this great taste is why so many people use their site as a reference and know of Stripe.
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Building an excellent product experience. Stripe has always focused on the elegance and simplicity of their APIs and they keep adding delightful features over time. And critically, documentation is also part of their product, and Stripe has prioritized making it excellent.
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Helping companies get started. Atlas and Indie Hackers expand Stripe’s Total Addressable Market by creating more potential customers and building early loyalty with them.
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Employees who love Stripe. They have attracted brilliant talent, and Stripe sets people up to publish their own thoughts and ideas — which signals to potential employees and customers that these are knowledgeable people you want to work with.
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Publishing helpful, authoritative, content.
- It has beloved API documentation the world over
- Stripe Press publishes books and documentaries They literally started their own book publishing company, Stripe Press. A seemingly odd move for a payments business, but when you think about how it fits into their strategy — brilliant.
- Increment is its engineering magazine
Bringing this all together — Stripe’s 7 powers work together to lock in customers and fend off competition while Stripe executes their long-term compounding strategy.
For instance, by creating an excellent brand, Stipe gets more of a cornered resource, which gives them more process power — which in turn helps them grow their business and create more scale economies. So the cycle goes.
And while a newcomer could match Stripe on certain features and undercut Stripe on pricing, Stripe has built these advantages over time and that is really hard for a startup to break through with any meaningful threat to Stripe.
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Stripe is one of the top payment platforms in the world, sharing 16%(Aug 2022) of the market (after PayPal). The deciding factors for the competitions would be as follows:
- Payment processing fee
- Subscription fee
- Accepted payment methods
- Contract length
- Hardware cost
- Customer service
Pros
- Flat-rate, transparent pricing with no setup, cancellation or monthly fees.
- Supports a wide variety of payment methods and currencies. (over 70 countries & over 135 currencies)
- Highly customizable checkout flow.
- 24/7 customer support via phone, email and live chat.
- Easy and quick to set up. (Stripe’s API is simple and easy to integrate, making it a popular choice for developers.)
Cons
- Open API and tools may be difficult to use without software development expertise.
- Limited functionality for in-person retail businesses and restaurants.
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Focus on a very specific audience. Stripe is very clear about putting developers first, and that reflects across the board.
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Before solving a problem that you think you should do, you had better think: what problem do I wish someone else would solve for me?
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The internet is massive. There are still a lot of people who are not online. Those that are online still bought most stuff offline.
The global e-commerce market is expected to reach $6.3 trillion by 2023, and the demand for online payment processing solutions is expected to grow along with it. Stripe is well-positioned to take advantage of this opportunity due to its easy-to-use platform and reputation for reliability and security.
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Stripe plays the long game, their 7 Powers will keep compounding on each, making it near impossible for newcomers to break in.
Stripe is enhancing online commerce for customers of all sizes through its suite of payment services APIs and offers value-added services like fraud prevention and analytics to save customers money to broadly enable e-commerce.
Stripe also aims to support its business partners’ growth. To build a complete toolkit for internet businesses, bundling an increasing number of services for small businesses, could help it become a stickier product. Stripe benefits from its huge amount of customer data, which enables it to improve products while upcoming new product development.
Stripe contributes to its customers’ growth in two segments: powering new business models and extending financial services products.
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“Over the last decade, AWS enabled any new business to start easily and inexpensively…Stripe is doing the same thing for online commerce. A large majority of the companies started in the US, and increasingly all over the world, will start with tools from Stripe.” — Hemant Taneja, General Catalyst
Source
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The Payments Ecosystem (Payfirma 2014)
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Payment processing companies
| Provider | Overview | Pricing | Better/Best for |
|---|---|---|---|
| Stripe | POS and online payments, accepts a variety of payments, customizable. | 2.9% plus 30 cents for online transactions. 2.7% plus 5 cents for in-person transactions. 3.4% plus 30 cents for manually keyed transactions. 3.9% plus 30 cents for international cards or currency conversion. | offers extensive point-of-sale (POS) tools, accepts 135-plus currencies and allows businesses to customize their customers’ checkout experience. |
| Square | POS and online payments, e-commerce store builder, billing, payroll and more. | 2.6% plus 10 cents for in-person transactions (2.5% plus 10 cents with Retail Plus plan). 2.9% plus 30 cents for online transactions or invoices without a card on file (2.6% plus 30 cents with Premium plan). 3.5% plus 15 cents for manually keyed transactions or card-on-file invoices. | in-person transactions |
| Paypal | Variety of options for accepting online payments; known for ease of use. | 2.29% plus 9 cents for in-person transactions. 3.49% plus 9 cents for manual entry card transactions. 3.49% plus 49 cents for invoicing transactions. | brick-and-mortar businesses expanding online |
| Adyen | Merchant account provider. Customizable; focuses on omnichannel sales and fraud prevention. | Interchange plus 12 cents per transaction for Visa and Mastercard. 3.3% plus 22 cents for American Express. 12 cents plus 3%-12% for other payment methods, depending on transaction type. 37 cents per transaction for ACH. | larger businesses with high transaction volumes |
| Verifone | Online payments only, with emphasis on global payments, digital goods and related ecommerce tools. | Starts at 3.5% + 35 cents for online payments. Does not offer processing for in-person payments. | online-only businesses that sell around the world |
| WePay | Allows merchants to create a custom payments platform so customers can send and receive payments. | 2.9% plus 25 cents per online transaction for credit card payments with WePay Link. Valid for new U.S. businesses only. 2.9% plus 30 cents per online transaction for merchant platforms without set processing fees. 2.6% plus 10 cents for in-person and manually keyed transactions. | online software businesses and Chase customers |
| Authorize.net | Payment gateway provider. Integrates with a variety of merchant accounts; get one through its resellers. | 2.9% plus 30 cents per transaction, and $25 per month for merchant account option. 10 cents per transaction, 10 cent daily batch fee and $25 per month for payment gateway only. | if you already have a merchant account or need only a payment gateway |
| Braintree | PayPal company; offers a payment gateway and merchant account packaged together. | 2.59% plus 49 cents per transaction credit cards, debit cards and digital wallets. 3.59% plus 49 cents for Venmo (U.S. only), transactions in non-U.S. currency or transactions outside the U.S. 0.75% for ACH (maximum fee of $5). Discounts available for enterprise businesses. | online businesses looking for a straightforward payment gateway with a merchant account |
| PayJunction | Payment service provider with digital focus that offers in-person and online payments. | Interchange-plus pricing with markup of 0.75% plus 7 cents for all credit card transactions; $35 monthly fee if you process under $10,000. | businesses ready to go paperless |
| Stax | Merchant account provider with unique subscription-based pricing model and direct cost of interchange transaction fees. | Interchange plus 8 cents for in-person transactions. Interchange plus 15 cents for manually keyed transactions. $99 per month and up for software. | businesses with high processing volume looking for traditional merchant accounts |