Why is it easier than ever to get a business off the ground? Ask the wunderkind founders of Stripe.
Dale Nirvani Pfeifer wants to save the world. A Kiwi academic with an infectious laugh, she spent years and flew thousands of miles searching for a philanthropic project she could believe in, moving from research in her native New Zealand to nonprofit work in New York City to a startup incubator in Washington, D.C.
There, Pfeifer toiled nonstop on her idea for a business, a company that would help charities turn concerned tweets and Facebook posts into real donations to the likes of Oxfam, Save the Children, and Greenpeace. She had the inspiration, the hustle, and the willingness to put in endless hours. What she didn’t have, when things really got rolling in 2014, was the technology to make her startup viable.
“We started out working with a company that was literally writing checks and sending them to charities,” recalls Pfeifer, the founder and CEO of GoodWorld. There had to be a better way, she knew, which is how she came across a startup called Stripe.
Today, GoodWorld is a full-fledged, for-profit, investor-backed company with 16 employees. It’s tracking to process more than $3 million in donations for 1,500 charities in its first full year. “There’s very little you can’t do yourself” when starting a business, Pfeifer says, but “when you’re dealing with processing payments, you don’t want to be messing around.” And, she adds, “our developers love Stripe.”
If that name–and that endorsement–means anything to you, you might be a coder, a Silicon Valley insider, or a payments-industry geek. Or, increasingly, you might be someone trying to fund your startup on Indiegogo, or launching an online store on Shopify. Or someone like Pfeifer: You have a brilliant business idea about a problem you know how to solve, but only some of the tech chops you need to solve it.
In other words, you might be someone who was once “held back by the fact that infrastructure sucks,” says John Collison, Stripe’s co-founder and president. “We should be, frankly, offended that it’s so much easier for an existing big company to launch a new line of business than for a small startup to get off the ground.”
Since 2010, Collison and his older brother, Stripe co-founder and CEO Patrick Collison, have spent almost every waking moment making it as fast and easy as possible to handle other people’s money online. In the same time that it took Pfeifer to launch her business, these 20-something Irish immigrant siblings have been transforming the ways many small companies sell things and transfer money online–eliminating their need to spend hours on the phone with banks or to negotiate for credit card processing accounts, as well as their worries about all the red tape (and bewildering regulatory acronyms) associated with online payments fraud and things like PCI and KYC. (If you must: “payment card industry” data security standards and “know your customer” anti-money-laundering rules.)
Stripe takes care of all of that for you. In minutes or hours, not days or weeks. The Collisons’ breakthrough product was–and is–seven clean, simple, beloved-by-developers lines of code; just drop it into your website and start selling things online. It’s free, as Stripe takes an industry-standard cut of every transaction–usually 2.9 percent plus 30 cents. (The company also gives volume discounts.) What predecessor Square did for the physical world, giving small businesses a simple, plug-in device to accept credit cards more easily, Stripe is doing for the virtual one–and by extension, the company says, for “hundreds of thousands” of businesses.
The San Francisco-based Stripe, which was valued at an eye-popping $5 billion during its most recent funding round last summer, is at the forefront of a group of ambitious, fast-growing companies that are rapidly simplifying the process of launching a business. Simply put: These are the companies that will help create your dream.
Websites, billing, payment processing, cloud computing, communications, funding–all have been made simpler by the likes of Squarespace, Slack, Kickstarter, Dropbox, Amazon’s ubiquitous Web services division, and PayPal. As has marketing: Ipsy co-founder Michelle Phan built a brand and a huge audience at minimal cost, thanks to her savvy use of online platforms such as YouTube. Like Stripe, many companies helping launch new businesses are themselves startups–like crowdfunder Indiegogo, co-founded by Danae Ringelmann in 2008–which means they also uniquely understand the headaches that bedevil entrepreneurs.
In the past 10 years, these building blocks have greatly reduced the time–and cost–involved to start a business, especially high-tech ones. Thanks to “the emergence of the internet, open-source software, cloud computing, and other trends,” some experts estimate tech-reliant ideas “that would have cost $5 million to set up a decade ago can be done for under $50,000 today,” according to a 2014 paper from the National Bureau of Economic Research.
Above all, these companies will help you stay focused on why you started your business in the first place. “It’s–oh, my god–1,000 percent easier now to go out and set up your own thing,” says Matthew Schwab, the co-founder and president of San Francisco flower-delivery startup (and Stripe client) BloomThat. “The more time you spend on administration, the less time you’re spending on growing your company. Payment processing is something that I could spend a ton of time on–but, literally, I don’t worry about it at all.”
Patrick Collison envisions a completely online future. It’s one where programmable electric cars have replaced suburban gas guzzlers, online meal-delivery services have preempted family grocery runs, and most Americans have moved from low-tech rural areas to cities. It’s one where Stripe has successfully attacked its most widely cited statistic–the 98 percent of sales that it says still happen offline–and helped online businesses everywhere take a piece of the action.
“I’m not a wide-eyed, arm-waving, techno-utopian,” Patrick insists, though he often sounds like one. “I don’t think the internet’s the be-all and end-all. But I am very optimistic that the internet will be an enabler of almost every part of the economy.”
Set aside their sibling banter and their (slightly California-flattened) Irish accents and John and Patrick seem like straight-up stereotypes of Silicon Valley founders: pale, male, Y Combinator-nurtured, Sequoia-backed, programmer-type veterans of multiple “30 under 30” lists, including Inc.’s. They’re elite-college dropouts (Patrick, 27, put up with three semesters at MIT; John, 25, lasted two at Harvard) and successful entrepreneurs, who became teenage millionaires when they sold their software business, Auctomatic, for $5 million.
They’re also immigrants who tout their company’s roster of international transplants, and have a deliberately global sensibility about how money can–and should–move more quickly around the world. And they’re now trying to translate what they’ve done for payments in the U.S. to other countries. In late February, Stripe unveiled Atlas, a new service that will let companies everywhere essentially buy a license to do business in America. For a flat $500, Stripe will help a non-U.S. company incorporate in Delaware, set it up with a U.S. bank account to accept American payments, and–of course–set it up with Stripe. It’s an ambitious, long-term bet to get more money moving online–and to get Stripe more heavily involved in both that commerce and any underlying business creation. As John puts it, “Patrick and I are almost suspiciously passionate about this.”
That drive has led them to do what seems impossible: make a business-to-business company sexy. This isn’t easy, as the founders of many an enterprise software firm could tell you. No matter how much more lucrative it can be to have companies as customers, it’s like housekeeping: Nobody really wants to hear how you keep a business’s software running smoothly.
Unless you’re the person responsible for that software, of course. Forget B2B; Stripe’s roots are D2D: developer to developer. The Collisons, who taught themselves to code as kids in rural Ireland (after persuading their parents to buy a satellite hookup so they could access the internet), built the product they had needed for Auctomatic. At first, the new company flaunted its developer-nerd bona fides with a completely impractical name: /dev/payments.
“I feel like this is the part of the conversation where you slide the white paper over,” John quips, interrupting Patrick’s casual breakfast ruminations on productivity research, lighting design, urban planning, and immigration policy. Patrick’s not just John’s CEO; he’s also his roommate. But the two don’t have time to get on each other’s nerves, according to John–and even have to resort to scheduling official catchup dinners, because “we basically never see each other in the office.”
The younger Collison says both are “introverts who have been forced to be extroverts,” but John has more obviously made the transition. Patrick is the chief engineer, quieter and more overtly intellectual. (“Of course he read that book. He read every book,” chief operating officer Claire Hughes Johnson, poached in 2014 from Google, mock-sighs in a separate conversation.) Patrick’s presence is precisely honed: voice soft but words quick; hands expansive but legs still; dark T-shirt and jeans enlivened by his socks (striped, of course); voluminous tufts of hair that read paler, in person, than the vivid orange you see in photographs.
John is Stripe’s people person, the sales guy who leads employees in evening runs up Bernal Hill behind company headquarters. “John is energy,” Billy Alvarado, Stripe’s chief business officer, says, and the younger Collison’s body is always in motion: folding his legs up in a chair, scrubbing a hand through his silvery-brown hair, pulling out his phone to show off his schedule or his Twitter feed or how Stripe integrates into Lyft. Patrick name-drops groundbreaking computer scientist Alan Kay or university founder Leland Stanford; John interjects pop-culture references. During one meeting, he succinctly–and effectively–asks if Stripe can make Atlas look like “the Domino’s pizza tracker of starting your company.”
Stripe needs to think in such terms, because it’s grown up fast. There’s the sprawling, three-building campus in San Francisco’s Mission district; a new headquarters under construction; 400 employees and plans to hire close to another 400 this year; that $5 billion marker achieved last summer via a financing round that attracted Kleiner Perkins, Visa, and American Express. In the past two years, Stripe signed up big-name tech partners: Apple, Facebook, Twitter, Pinterest–seemingly most of Silicon Valley. Still, in late January, Alvarado said “the jury’s still out” on how important such partnerships will be in the long run.
How much traction Stripe has outside the Bay Area and its tech scene is an open question, and one that the company resists all efforts to quantify. The Collisons won’t disclose the breakdown of customers, except to say that many more are small than large; an in-house publicist at one point says Stripe “can’t uncover” those numbers. The company won’t discuss revenue or profitability or any other data about growth, other than to reiterate that 27 percent of all Americans bought something using Stripe last year, up from 3.8 percent in 2013.
Still, Stripe remains a small fish in a big pond. To give some context, in 2015, payments processing giant First Data processed $1.7 trillion worth of online and offline transactions in the U.S. alone, and claimed to have a lock on 28 percent of global e-commerce; industry sources estimate that online-only Stripe handled around $20 billion in 2015. The potential for Stripe is vast: Americans spent $907 billion last year on e-commerce, according to 2014 projections by financial consultancy Aite Group. Global online transactions will grow to $5.9 trillion by the end of this decade, Aite estimates. But Stripe faces many competitors, including the massive processing arms of banks and traditional financial companies. Or the 800-pound gorilla of online commerce: PayPal said that Braintree, which it bought in 2013 and which competes with Stripe, processed $50 billion in payments last year, including heavy volume from tech juggernaut Uber. (Stripe works with Lyft instead.) There are other startup entrants, too, including WePay and Europe’s Adyen.
“The Braintrees and Stripes–they’re the disrupters,” says Aite analyst Thad Peterson. “They’re growing nicely and getting a lot of noise in the press, but the vast majority of payments-processing volume is moving through traditional channels.” And payments are a particularly tough market to break into: There are lots of regulations and big, established competitors, and the business is, paradoxically, both high cost and low margin, thanks to a fee system set up half a century ago by the banks. Stripe’s pricing setup–that flat fee per transaction–also must cover many fixed banking costs. Such a structure doesn’t allow for a lot of profit growth, unless–until–Stripe introduces more lucrative products.
This problem helped hurt Square’s valuation when it went public in late 2015. Unlike Square, Stripe has no costs associated with providing a physical product–but like Square, it has to grow beyond the commodity business of processing payments. (Stripe’s new Atlas service, obviously, aims to do that, though both Collisons admit it will take years for that bet to pay off.)
Patrick dislikes this comparison. “We compete on the basis of our product, and if you’re building some kind of great digital service or product or whatever, it’s really important that Stripe is the best thing to use there,” he says. Customers agree, praising the company for its responsiveness, cool factor, and ease of use.
“Stripe’s systems are really well documented,” GoodWorld’s Pfeifer says. “They have really great forums with lots of information, and if there’s ever anything wrong, they respond quickly. And a lot of people have heard of them now. That makes our customers feel secure.”
Launching Atlas meant prepping for more potential scrutiny from regulators, who have security concerns about foreigners setting up U.S. bank accounts. But it plays into Stripe’s emphasis on immigrants and Patrick’s desire for the internet to enable everything. Stripe’s services are now available to about 1.2 billion people in 24 countries–which, Patrick estimates, means that 6 billion potential customers remain. “The upside is so plainly apparent,” he says. “You’d have to be extraordinarily pessimistic on the rest of the world if you didn’t think that, among the 6 billion people, there are going to be a bunch of extremely successful companies that result from this.”
Some tensions arise from Stripe’s internationalist rhetoric and its business realities. On Twitter, both brothers have expressed skepticism about Donald Trump’s anti-immigration statements, but Stripe processes political donations to him and the other major U.S. presidential candidates. In person, the Collisons deflect questions about the candidates, the presidential campaign–and even whether they’re planning on eventually becoming American citizens.
And, as with any startup blessed with skyrocketing growth, internal hurdles loom. Headcount doubled last year, and will do so again this year; whom the company wants to hire and who will fit at Stripe is hard to define. “I think I lost my voice over this,” says Johnson, blaming raspy vocal cords on a four-hour dinner conversation she’d recently had, debating how to define the company’s culture. And Stripe clings to idealistic policies that are much less feasible at scale–such as the open-email policy that encourages employees to copy all emails to public archives. Intended to ensure cohesion on strategy and goals, unintended consequences arise: Some employees still read every archived email, and, Johnson says, sometimes pop into the conversations to correct others’ grammar, or chastise those mixing up “Pacific Standard Time” with “Pacific Time.”
Stripe’s biggest challenge, though, is cementing its influence beyond its fervent fan base of developers, and moving beyond merely processing payments. If Atlas succeeds, Stripe expands beyond those like BloomThat’s Schwab, who also went through Y Combinator and says “there’s obviously a bit of loyalty” in using the Collisons’ product.
Then again, maybe the world is bending exactly in Stripe’s direction. BloomThat’s chief engineer and first employee, Kevin Klein, came to the company after co-founding a consultancy that helped startups get off the ground. But today, in a post-Stripe, post-cloud, post-crowdfunding world, he’s rejoicing that few still need his last company’s services.
“I literally made a living doing this,” he marvels. “Now I couldn’t. It’s just so easy to go out and set up your own thing.”
Instant Startup How-To Kit
1. Data services
“I have a lot of admiration for Amazon Web Services,” says Stripe’s John Collison. He’s not alone–everyone from tiny startups to Netflix uses the Web giant’s cloud to store and manage data. Box, which went public last year (and was Inc.’s Company of the Year before it did), and Dropbox are other key players that help you access your data from anywhere–something unimaginable to a previous generation.
2. Web design
Your company will need a website–and you can set one up now without knowing much more than how to type, thanks to the likes of Wix, Weebly, and Squarespace. PayPal co-founder (and Stripe investor) Max Levchin recommends WordPress, among several services that can help get your company off the ground: “There are all of these building blocks now,” he says.
Post-eBay and post-Etsy, it’s easier than ever to sell stuff–and services–online. Inc. Founders 40 company Shopify is heavily endorsed by key startup founders, including Stripe’s Collison brothers.
Whether you’re raising funds (Indiegogo, Kickstarter, CircleUp), getting a quick loan (Lending Club, Prosper, Kabbage), or processing payments (Stripe, WePay, PayPal) or payroll and benefits (Gusto–formerly ZenPayroll–Paychex, Zenefits), a universe of companies now take on these boring, headache-inducing, yet crucial tasks for you.
5. Office space
WeWork, with offices around the globe, has popularized the temporary, part-time desk, but other local landlords and incubators offer similar “co-working” offices, often with common areas for bonding, on-hand mentors for advice, and beer. GoodWorld’s Dale Nirvani Pfeifer, for example, credits the Washington, D.C.-based 1776 for connecting her with high-profile investors and her eventual COO–not to mention getting her into meetings with President Obama and British Prime Minister David Cameron.
Talk amongst yourselves? Absolutely–via Google’s chat, email, and docs; Basecamp‘s chatrooms; or, hell, even the omnipresent Facebook Messenger. Then there’s Slack, Inc.’s 2015 Company of the Year (and a Stripe client). As with Stripe, Slack got hot thanks to a loyal following among developers. As hard as it may be to imagine now, there was a time when the monthly phone bill was a significant expense.
The proliferation of free social-media platforms is a blessing and a curse: You can blast your company’s name, mission, and products all over Twitter, Instagram, YouTube, Snapchat, and Facebook, but it still takes savvy strategy–and a keen understanding of what works best on each site–to transform new fans into paying customers. But it can be done. Just ask Ipsy‘s Michelle Phan.
8. Managing your customers
After winning customers comes keeping them–and getting more out of them. Salesforce.com is the undisputed champion of “customer relationship management,” or CRM. Newer competitors include Pipedrive, SugarCRM, and HubSpot. All centralize data that in an earlier era required a roomful of file cabinets–and several dedicated staffers.
9. Virtual assistants
Your secretary’s robot replacement is coming sooner than you think–and it’s pretty inexpensive. The new breed scans emails to schedule your meetings and responds to voice commands to handle many simple tasks. Names to know: 24me, Amy Ingram (a product, not a person), Hound, and Viv.