Stripe’s Successful Strike
With COVID-19 shutting down much of the economy, many companies are struggling to keep their heads above water. Some of the largest corporations have announced mass layoffs as they prepare for possible restructuring and bankruptcy. But despite this uncertainty, Stripe has defied all odds. On April 16th, 2020, Stripe announced a $600 million raise of capital, bringing them to a valuation of $36 billion and making them the 3rd most valuable U.S. startup ever. Stripe’s improbable financial resilience despite COVID-19 is in large part due to the multitude of industries the company services.
The company was founded by Patrick and John Collison in Ireland. The college dropout brothers conceived of Stripe in early 2010 after Patrick complained about the difficulty of accepting online payments. While the brothers were working on a few side projects at the time, it wasn't long before Stripe had sold the platform to a number of companies and the brothers moved to San Francisco with Stripe as their full-time venture. In 2011, the brothers approached the owners of Paypal, Elon Musk and Peter Thiel. The brothers' pitch was simple: a simplified payment processing software compatible with a multitude of different cards and international currencies. Thiel was impressed with the pitch and the brothers’ ambition to improve on existing online payment processing platforms. The meetings led to a $2 million Series A funding along with Sequoia Capital. Soon enough, smaller companies and other startups in need of a payment processing system approached the company, and Stripe became the hottest attraction in Silicon Valley.
Stripe makes its money acting as the brokers between company and consumer. With the world becoming increasingly digitized, companies have had to adapt to the new fintech trends and are relying more heavily on their online presence. In 2019 alone, the U.S. e-commerce ballooned 14.9% from the previous year to account for over $600 billion in transactions. Since its inception, Stripe has handled billions of dollars of online transactions. The company charges 1.4% plus 20 cents for European transactions and 2.9% plus 20 cents elsewhere, which is a more business-friendly payment structure compared to other platforms.
On the customer side, Stripe allows consumers to connect their credit cards and banking systems to different websites and apps and takes a small percentage on every transaction. Additionally, Stripe provides businesses with a comprehensive payment platform, ranging from storing credit card numbers to preventing fraud. With a sturdy business model not dependent on any particular industry, Stripe looks to retain its position as the premier international payment processor.
Amongst the company’s most prominent clients are Amazon, Postmates, Lyft, Facebook, and, most recently, Zoom. Over the past year, 80% of U.S. shoppers have bought something from a Stripe client. Additionally, Stripe offers over 250 different payment methods and accepts 187 currencies, allowing companies to conduct business worldwide. As of early 2020, Stripe reported $2 billion on its balance sheet. According to Robert Le, a Pitchbook analyst, Stripe represented around 10% of total e-commerce transactions before the pandemic. For the foreseeable future, as many businesses continue to operate online exclusive platforms, Stripe looks to further build upon its success.
Stripe’s most recent funding is the 12th round, an anomaly amongst startups. With its new funds, it has been able to evolve into a fintech giant. In 2016 Stripe launched the Stripe Atlas platform, a $500 service that allows entrepreneurs and their customers to use the service irrespective of location. In September 2019 Stripe announced the launch of the Stripe Corporate Card and Stripe Capital. Amongst corporate cards, the service is unique as it does not charge interest but instead collects a fee on every transaction. Additionally, Stripe Capital allows businesses to administer loans greater than $10,000. With many different branches in the fintech industry, Stripe finds itself in a very opportune position.
Despite its dominance in the business services industry and promising future, there are still some questions about Stripe. Because it is a privately held company and not required to release audited financials, investors are unsure about Stripe’s exact financial figures. Additionally, Stripe was expected to be a top IPO candidate in 2019 but decided to hold off due to the recent struggles of other start-up IPOs such as Lyft and Uber. But Stripe is trending in the right direction and will continue to solidify itself as both the leader in payment processing and an innovator in the rapidly growing fintech industry.
Photo Caption: Stripe has become one of the fastest growing startups.
Photo Credit: Stripe
