How Stripe Built A $35 Billion Company

Think of the term “middleman”, and it
conjures up negative ideas and stereotypes. In fact, “cutting out the middleman” is
considered a good thing. But is it? Stripe, one of the fastest-growing fintech
companies in the world, has positioned its growth on being known as the Internet’s
Middleman. And based on its recent valuation of $35 Billion,
they’ve done pretty well in that space. In this video, we’ll cover exactly how Stripe
has established itself as the premier choice for accepting payments online. This video is brought to you by EquityZen,
the pre-IPO marketplace. Growing up in rural Ireland, brothers and
co-founders of Stripe, Patrick and John Collison, were exposed to the world of business at an
early age. Sons of entrepreneurial parents, it seemed
natural to start and run businesses for the boys, often a game they would play as children. It wasn’t until their early teen years that
they first got access to the internet, each of them building their own websites and experimenting
with web development in their spare time. Both Collison boys received high marks in
school and started to develop online businesses as a natural extension of their passions. While they were 19 and 17 respectively, they
started Auctomatic, a business that intended to solve some of the issues they saw with
eBay. In a span of just 10 months, they built, funded,
launched, tested, and sold that company for a cool $5 million dollars, making both boys
handsomely rich before even finishing high school. After moving to the US, the Collisons attended
Harvard and MIT for a few months and regularly discussed the future of online transactions. Funding their tuition by developing iPhone
Apps, they remarked how easy it is to make money with the convenient payment system on
the App Store. But if you were running an online business,
however, the ability to accept payments felt like the 1970s. It was complex, antiquated, and in desperate
need of a change. The financial barriers to starting a business
were immense, more favorable to large corporations, and hardly encouraging for the small startups
that Patrick and John were familiar with. Businesses couldn’t devote enough of their
time to working on their products because they had to deal with currencies, reporting,
payment routing, and dozens of other financial hoops simply to allow customers to give them
money. Joking that they should just start their own
payment service, Patrick and John stumbled on to their “Next Big Thing”. It was here where others saw just 16 digits
on a piece of plastic and a few lines of code, but for these two young men, they saw opportunity. It was late 2009 when the Collisons started
working on their payment acceptance service, dropping out of school and moving to Buenos
Aires to work full-time on their revolutionary idea. Stripe, even though it was called “slash
dev slash payments” back then, felt very natural to the Collisons. They wanted to solve their own problems as
well as those of their friends. If they could remove the need for startups
to worry about the financial side of business, then these startups could invest more time
and energy into their products and services. With a few internet businesses under their
own belt, the Collisons were intimately aware of the problems of accepting payments. By creating Stripe, they were first focussed
mainly on solving their own issues. But within a few months, it became apparent
that this lake of potential customers was actually an entire ocean. All of eCommerce could benefit from the service
that Stripe provided. And so, their vision became even grander. Enter Y Combinator, the start-up accelerator
with several successes under their belt. Founder Paul Graham had already made several
hundred thousand dollars with his investment in Auctomatic and once the Collisons applied
again, this time with their new Stripe concept, he readily funded it in 2010. Launching a beta test, they attracted more
interest from Angel investors, including Peter Thiel, the founder of PayPal. They were allowing businesses to receive payments
immediately and test their theory that these companies would grow because of Stripe’s
financial middleman platform. And by September of 2011, they were live and
available to the public. After that, growth was enormous. In 2012, they secured a round of funding from
the famed venture investment firm, Sequoia and AMEX Ventures. In 2014, they raised another round of funding,
bringing their valuation from $1.7 billion to $3.4 billion in just a matter of months. And by 2019, Stripe’s latest round of financing
raised an additional $250 million at a staggering valuation of $35 billion. At this stage, Stripe isn’t simply offering
a way for startups to accept money. They had launched Radar, a machine-learning
fraud-detection service that reduced credit card fraud by as much as 25%. They also launched Atlas, providing an end-to-end
business formation service, allowing anyone in the world to quickly and easily form a
new company, further removing the barriers for innovation. Recently, Stripe launched Issuing, a platform
that white-labeled credit cards for businesses, offering a percentage of the fees that Stripe
collects as a cash back for its business customers. And what’s next for Stripe? Maybe with the new credit card service, they
are positioning themselves for a buyout from one of the major credit card companies that
invested in them. Maybe they intend to go public with a more
complete version of their already extensive end-to-end service. The Collisons are tight-lipped, saying that
they remain in the expansion phase, not yet done developing and offering new solutions
for the growing transition to online commerce. In 2018 alone, it’s estimated that half
of Americans who spent a dollar online, used Stripe to make that payment. Stripe never intended to become a competitor
to major payment facilities like Paypal, Square, or Apple Pay. But as a fast follower, this unicorn company
has been able to watch what the “big guys” are doing and swiftly improve their own service
to capture a huge portion of the market, including offering payment infrastructure to Amazon,
Facebook, and Lyft. By making online business easy for everyone,
Stripe, and the middleman service they offer, has become an incredibly popular company. Of course, this was only possible because
of the investors who believed in them and funded their success. Which brings us to today’s sponsor, EquityZen. EquityZen has opened the door to pre-IPO investing. Since 2013, they’ve been one of the leaders
in connecting shareholders of private tech companies who wants to sell their stock to
accredited investors looking to access the private market. Their investment funds buy shares of companies
like Stripe while they’re still private, allowing you to unlock investment opportunities
that were once only available to well known venture capitalists. And if you’re new to EquityZen, you can
invest for as little as $10,000. Click on the link below to learn more about
how your capital can appreciate through pre-IPO investments offered EquityZen If you enjoyed this video, also be sure to
click the like button and subscribe for more content just like this. Until next time, stay smart.

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