Sexy Payments Startup Stripe Swipes $20M From General Catalyst, Sequoia, Thiel And More

White-hot payments startup Stripe has closed a $20 million Series B round of financing, led by General Catalyst with existing A-list investors Sequoia, Peter Thiel (personally) and Elad Gil also following on. Redpoint will be coming on as a new investor along with angels Chris Dixon and Aaron Levie.

Stripe’s valuation during this Series B was in the hundreds of millions, up to a half-billion dollars, according to a source (It’s unclear whether that valuation is pre- or post-money). The relatively under-the-radar company has already raised $20 million in prior funding from the aforementioned investors as well as PayPal co-founders Max Levchin and Elon Musk, with the under-reported $20 million Series A happening 12 months before this round closed.

While the startup has declined to share specific metrics, Stripe is “growing like Square” according to one well-informed source. In the same space as Braintree, Stripe wants to corner the online transaction market by streamlining the heinous process of building out a payments system.

Despite investment from three out of five PayPal co-founders, Stripe actually competes directly with PayPal in that it allows developers to avoid setting up merchant accounts and dealings with banks, while still ensuring transaction safety. Developers are psyched about its super easy API, namely because every other option to facilitate online payments seems like a colossal pain in the ass.

Co-founder Patrick Collison tells me that there are presently 100k developer accounts created on the platform, and from what I’m hearing there are also some “major” e-commerce players in the pipeline to use it.

“For us the real advantage of Stripe is that it makes payments so easy to implement it changes the types of products we can build,” says Xamarin founder Nat Friedman on why he chose the product over competitors, “We’re able to experiment with introducing paid features, marketplaces, and other ideas that we otherwise wouldn’t even try.”

“Processing credit card payments ourselves would mean PCI compliance and supporting a host of different credit card types, and dealing directly with the banks that do the clearing,” says Foursquare’s Jason Liszka, who also uses Stripe to process payments on Foursquare, “Stripe’s API abstracts away all these complications and lets us focus on our core business.”

“I see Stripe as the Twilio for payments,” Liszka continues, “Twilio identified that the telephone system was a complicated mess and built a clean, dead-simple API on top of it that made it easy for anyone to use. We integrated with Twilio about 2 years ago and basically forgot about it. I hope the same happens with Stripe.”

Exec’s Justin Khan had a similar hassle-free Stripe experience, which he outlined for me in an email:

Stripe made it super, stupid easy to set up live payments on Exec. It took me like 30 minutes when we were first launching our beta for Exec in January, and I’m not even a good programmer. Here’s the chain of events:

  • 1pm: I think “hmm, we’re going to need to add payments to Exec. Good thing I know the Collisons, so I’ll be able to get a live account faster.”
  • 1:01pm: I realize I can just sign up for an account and immediately start processing payments from the site, no questions.
  • 1:05pm: I start reading the documentation, add their js file to our beta site.
  • 1:25pm: I have test payments working. They show up in real time.

“The unlocking of payments by companies with good, sane customer service like Stripe and Dwolla makes it much, much easier for new companies to get started,” Khan says, echoing Collison’s vision, “This is really good for the startup ecosystem.”

“Stripe isn’t another mobile games company,” the 23-year-old Collison tells me, “The problem we’re tackling is really hard. We’re building the economic infrastructure for the Internet.”

“In short, there isn’t a real alternative to Stripe,” says Shopify founder and Stripe customer Tobias Lütke, “They cracked the code on how internet payments ought to be done.”

Collison also tells me that the startup’s efforts to stay relatively stealth have been thwarted by its success, “People have been hearing about the importance of Stripe directly from the people building things. And we’ve been growing very fast.”

At the moment the startup charges a base 2.9%  fee + $0.30 for every successful transaction, with no other surcharges or monthly fees, “All the other systems try to make their costs hard to model: they charge you for things like failed payments and card storage. This makes no sense, and so our pricing is just that: 2.9% + $0.30 on the money you actually get. We only make money if you do.”

Having just picked up rockstars Alex MacCaw, Ben De Cock and Ben Rahn to flesh out the 28-person team, Collison plans on using the funding to further hire, in order to handle the startup’s new-found scale. He’s focused on expanding Stripe outside the US; The company’s Canadian beta just started today and Western Europe is next.

Collison, who paid much of his way through M.I.T. by selling the “Offline Wikipedia app,” also hints that big product announcements are on the horizon. Hopefully you’ll hear about them here first …

Online payments, the final frontier.