How did Stripe take over the internet without anyone knowing their name?
After securing an additional $600 million in their latest round of fundraising, Stripe is now officially the top U.S. start up, surpassing SpaceX with a value of $95 billion and just a few weeks ago, I couldn’t tell you what they did. Unlike PayPal and Square who have focused on brand recognition and their consumer facing strategy, Stripe is a payment processing software that has managed to dominate the market while operating almost completely behind the scenes. Unlike the traditional Silicon Valley start-up strategy, they are currently focused on expanding European operations and acquisitions and have continued to stay silent on any IPO plans.
What surprised me most is the vast reach that Stripe has had without building significant brand recognition. I learned that 80% of U.S. consumers have purchased something online through a platform powered by Stripe, but most of us didn’t even realize that we were using it. Stripe operates in the background of most companies, processing the payments and taking a small percentage of each transaction without requiring any consumer facing branding unless that company chooses to display it.
So, what is it about Stripe that makes it so valuable?
Their mission is simple but ambitious: Increase the GDP of the internet. In their own words:
“Removing the barriers to online commerce helps more new businesses get started, expedites growth for existing companies, and increases economic output and trade globally.”
While there are many aspects of the business model that make Stripe so highly valued, what stands out to me most is their focus on providing the fastest and most simple product for companies of any size that can be easily integrated as opposed to a more typical Silicon Valley start-up strategy of building massive brand recognition with the end consumer. Stripe has made this easy integration possible for companies of any size, with no intermediaries and just a simple API. In an interview with Wired magazine, one of the founder’s John said:
“For us it was quite visceral: these products are not serving the needs of the customers, so let’s build something better,” John Collison argues. “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.”
A big part of their vision is to be able to empower entrepreneurs and companies around the world, helping small businesses launch on the internet that previously would never have been able to. They launched Stripe Atlas in 2016, which is a simple, easy to use platform that allows entrepreneurs to start their company from anywhere in the world and that became another key differentiator for them. Stripe is focused on building a platform that drives accessibility across the globe, removing barriers to entry to the market as opposed to adding complexity.
CNBC writer Riley De Leon said it well: “Over the years, the company has built out a bigger platform around that, a suite of services to position itself as a one-stop shop not just for helping businesses run all of the commercial aspects of their operations, including incorporation, managing fraud, managing cash flow and more.”
Lean Operations & Pandemic Effect
In addition to their overall vision and strategy, a few other factors stood out as key differentiators for Stripe.
The first is their lean operations. Stripe is now over 10 years old, and they still have less than 3,000 employees. They have kept their focus on growing their business, reaching as many businesses as possible, not growing just to become the next Tech behemoth. They are incredibly capital efficient and they make very intentional decisions about their workforce. Because their platform is so simple, they have also been able to operate with a lean support staff for customers, where support normally is a huge cost for large technology companies.
Additionally, they have been one of the big beneficiaries of the e-commerce boom over the past year due to the pandemic. With the massive uptick in consumer spending online, more and more transactions are taking place on Stripe — whether we know it or not.
Where do you see the payments space going next?
Sources:
https://www.inc.com/james-ledbetter/why-stripe-is-invisible-tax-on-half-internet.html
https://techcrunch.com/2021/03/14/stripe-closes-600m-round-at-a-95b-valuation/
https://stripe.com/newsroom/stories/postmates
https://www.wired.co.uk/article/stripe-payments-apple-amazon-facebook
