Paypal created a cost effective way to safely accept payments 10 years ago, but the web has changed dramatically and accepting payments has not. Enter Stripe, a company that in my opinion is going to get very influential over the next few years. At a recent Startup Grind event I interviewed 23-year old Irish co-founder Patrick Collison who has raised $18MM from Sequoia Capital and others. Patrick is leading a company poised to completely disrupt the online payment industry starting with your website.
Patrick has the most valuable of Valley technology skillsets. He’s a technical prodigy having won numerous prestigious awards including Ireland’s 41st Young Scientist and Technology Exhibition in 2005, a national science competition which boasts hundreds of submissions each year from the country’s brightest young scientists. But he also has the personality and presence to be a leader and CEO. His two brothers are equally impressive. John is one of Stripe’s co-founders not to mention a Harvard dropout and one of the first engineers at Auctomatic. His youngest brother, Tommy, is a teenage blogger and writer that probably has more Twitter followers than most of us.
Y Combinator and Paul Graham
Patrick holds the distinction of literally being the face of Y Combinator. He’s the skinny red headed guy you see on the front of their website. While attending MIT at age 18, he and his brother decided to build a better version of eBay. After applying to YC they merged with Kulveer and Harjeet Taggar to build Auctomatic. They moved to an apartment in San Francisco, raised angel funding, and went to work. After launching and getting initial user traction, the company was acquired by Live Current Media and the founders moved to Vancouver to build the product. From start to finish the company’s pre-acquisition life span was just 10-months. Stripe was also eventually funded by YC.
Patrick said that YC’s founder network is one of its most valuable assets. “Having all these other people building startups and having them want to help us because we were a fellow YC company, that was super valuable for us.” He added that perhaps the greatest advantage to YC is that, “Paul and the (other) partners are just really smart. There is no question that they are very top tier.” Because of the sheer quantity of deals and companies that they interact with combined with those smarts, they’re able to offer both specific and strategic feedback that is second to none.
What makes Paul special? According to Patrick, Paul Graham is able to make surprising ideas and connections that other investors and advisors simply aren’t able to make. What isn’t Paul Graham so good at? Patrick says, “He’s not good at feigning interest.”
Solving Hard Problems
“The most striking example I know of schlep blindness is Stripe, or rather Stripe’s idea. For over a decade, every hacker who’d ever had to process payments online knew how painful the experience was. Thousands of people must have known about this problem. And yet when they started startups, they decided to build recipe sites, or aggregators for local events. Why? Why work on problems few care much about and no one will pay for, when you could fix one of the most important components of the world’s infrastructure? Because schlep blindness prevented people from even considering the idea of fixing payments. Probably no one who applied to Y Combinator to work on a recipe site began by asking “should we fix payments, or build a recipe site?” and chose the recipe site. Though the idea of fixing payments was right there in plain sight, they never saw it, because their unconscious mind shrank from the complications involved.”
– Paul Graham, SchlepBlindness.
John and Patrick first started working on Stripe in early 2010. The inspiration came when Patrick, who was working on a few side projects, kept complaining about how difficult it was to accept payments on the web. The two quickly developed a simple solution and within 2-weeks they had processed their first transaction. Over the next 6-months they showed it to friends, watched people interact with it, and iterated as fast as they could.
In the beginning they weren’t sure how big the market was or whether they could accomplish their goal of addressing issues like fraud and non-US payments in a user-friendly way. They originally partnered with a payments company, but quickly realized that the only way to control the entire experience was to control all aspects of the process. That’s when they brought everything in house.
By the fall of 2010, Stripe had become their full-time jobs. They thought about bootstrapping it, as they had to that point, but soon realized that as a payment startup they would need the kind of institutional credibility that only a top-notch investor could provide.
“Even Turkeys Can Fly In A High Wind”
Stripe’s most requested feature is to expand beyond the United States, which is something he assured me they’re working on. The team also recently moved from Palo Alto to San Francisco to accommodate their rapid expansion.
To date the company’s growth has been completely organic. Before they publicly launched last fall they had more than 1,000 developers on a waiting list and have grown almost exclusively by positive word of mouth. For those wondering why they haven’t heard of Stripe, it’s because true to Steve Blank’s Customer Development process, they have planned to turn on the marketing as soon as they were sure the product was right. Quoting from a Kleiner Perkins founder Eugene Kleiner saying, “Even turkeys can fly in a high wind.” Watch the full interview here.