How Stripe grew from 7 lines of code to a $74 billion valuation
Stripe’s extraordinary growth story shows what it means to respond swiftly to emerging trends, addressing a wide range of customer needs. Here we look at some of the company’s success stories and how Stripe has shown an unwavering commitment to its original mission.
Today, Stripe is one of the top ten most valuable private companies in the world. In just over 10 years, it evolved from a white label payment processor to a leading provider of “economic infrastructure for the internet”.
In 2010, two Irish brothers took on the hitherto unsolved problem of accepting payments on the web. Their seven-line API allowed anyone to embed online payment into any app or website, reducing set-up times from weeks to minutes.
With a promise that anyone who integrated the API wouldn't have to tweak it for years, Stripe’s solution wasn’t the cheapest, but it was the smoothest. It removed the dozens of intermediaries typically needed for web payments.
In doing so, their product became the most cost effective.
Scaling products, true to form
Scaling a unicorn from seven lines of code has required relentless flexibility and a focus on the detail of their subsequent products.
As talk of a potential IPO, recent over-hiring, and a major tax-triggered private fundraise all have piqued interest on Wall Street, it's important to reflect on how the Collison brothers have managed to remain focussed on Stripe’s core DNA.
Their core promise - to make payments easier - has been leveraged further by a continued, intense attention to product detail; scaling and testing new products through a global, diverse customer base, retaining flexible, easy-to-use technology, and empowering entrepreneurs to open up new markets and geographies, putting Stripe at the heart of that journey.
Stripe’s expansion mirrors the growth of the global B2B market, valued at $1.564 billion in 2022 and projected to reach $1.91 trillion by 2028.
Their high-performing payment infrastructure has accommodated huge shifts in online payment volume, with new customer behaviours, changes in the fraud environment, and new global digital export routes. But, where opportunities for horizontal product integration snowballed, Stripe’s focus didn’t stray.
William Gaybrick, the company’s former CFO and Head of Product Development, noted that Stripe’s “core constituency, developers, have a very unique perspective on how the world should work, which is around efficiency, logic, speed, clarity”.
It is Stripe’s easy-to-integrate API that remains one of their most important strengths. It provides a flexible payment processing service, which, with the help of an API integration, alongside a raft of other tangential applications, is used by individuals, small, medium and big businesses alike. So far, it has captured 19.22% of the payment processing market globally including leading brands such as Samsung, Target and HomeDepot.
2012 - Stripe Connect
When Stripe Connect was launched, it not only leveraged the hypergrowth of e-commerce platforms such as Shopify and ride-hailing app Lyft, but the product itself made it easy for e-commerce platforms to pass along payments to merchants and drivers.
Early Stripe investor, Elad Gil commented that “Stripe was the way to index e-commerce…Instead of trying to invest in every startup, you could just invest in Stripe.”
Soon, others - Amazon, Wayfair, Instacart and Postmates, had joined the party. In harnessing the explosion of e-commerce start-ups and empowering entrepreneurs, Stripe cemented itself as an essential component of online commerce, unlocking further inter-industry and horizontal opportunities for the Stripe ecosystem.
Stripe Connect easily integrate payments into a platform or marketplace.
2016 - Stripe Atlas
As the global B2B payments market exploded exponentially and competitors emerged on the scene, Stripe’s leverage of its diverse and established customer base paid dividends. The emphasis on deeply understanding the customer journey opened the door to their third product in 2016.
Stripe launched the Stripe Atlas platform that allows entrepreneurs from even the most challenging places to incorporate as a US company in Delaware. Where payments are Stripe’s bread and butter, their culture to understand their customer’s other financial problems, whether fraud, cash flow or inventory management, has enabled them to leverage the diverse customer base. Drawing on relationships with millions of customers in over 140 countries, from small businesses and medium-sized enterprises to world-leading corporations, this variety of customer has been critical to growth when testing and deploying new features or services.
In the words of Stripe CEO, Patrick Collison, “where most tech companies are building cars, Stripe is building roads” because they build them to where their customers want to explore and ask those same customers to make the first tracks.
Scaling through innovation and geography
A turbulent global energy environment, high inflation, and shifting geopolitics have wrought significant impact on liquidity and investment strategies for companies across the globe. This has changed payment economics on both sides, disrupting the global payment value chain. Stripe has not taken a back seat, they have capitalised on and invested in trends that continue to disrupt the global payment value chain, and in some cases have used them to explore new geographic opportunities.
Over the past two years, Stripe has forged dozens of strategic business partnerships, invested in almost 20 different companies, and even made a handful of acquisitions. Stripe is strongly positioned to ride the wave of evolution that is seeing new technology enter the payment industry and the adoption of embedded finance across new industries.
Strategic investment across an evolving value chain
Traditional B2B and cross-border payments can take ten times longer than a domestic one. This has seen the rapid evolution of faster and cheaper payment options. In 2022, global cross-border B2B payments reached $156tn as traditionally siloed payments systems began to update old infrastructure, accommodating integrated payments and sales at scale. Over the last 2 years, Stripe has expanded its foothold in B2B payments through investment, forging business relationships with multiple B2B sales companies, most notably investments in Balance, Stedi, Accord, and Keap. Stripe is leveraging new standards of payment batching and messaging and, capitalising through investment, on the opportunity to provide new payment infrastructure.
To maintain its growth, Stripe has actively explored investing in new areas of development and geographies.
Embedded finance prioritises Banking-as-a-Service
The widespread adoption of Banking-as-a-Service, driven by digital-first players and open APIs has shifted financial product delivery from traditional banks to alternative producers such as neobanks, Big Tech and Fintech. Digital-first players such as German fintech, Solaris, and the UK’s first new clearing bank in 250 years, Clear Bank, are transforming the growth of banking.
Rapid digital transformation, fintech partnership models, and APIs are driving growth of the BaaS market, projected to reach $2.3billion by 2028. Added to which, direct-to-consumer financial service models are transitioning across to non-financial tech.
2020 - Stripe Treasury
The Launch of Stripe Treasury marked the company’s entrance into embedded finance.
Shopify Balance takes advantage of Stripe Treasury. Whilst not a bank account, if a Shopify merchant wants to hold money, pay bills and spend money from their Shopify account, they can directly open a bank account in Shopify Balance.
Powered by Stripe Treasury, this side steps the traditional bank account but allows Shopify and their users to take advantage of an embedded financial product that is as close as possible to the end customer in the services they already use. BaaS APIs are the new currency of financial services, indicating that the ‘as a service model’ is here to stay.
Buy-now-pay-later and credit cards
The increasing need for credit opens an opportunity for buy-now-pay-later (BNPL) products. In the US, three in five shoppers have used BNPL, and they are fuelling the growth of a global market valued in 2022 at $179.5 billion.
Yet, future payments hold risk for repayment and fuel concerns over an increase of consumer debt. This has seen regulatory bodies across Europe investigating and drafting regulatory frameworks that will likely impact revenue models. Digital platforms that embed merchant, small and medium sized businesses financing into their offering can rapidly, and at low cost, acquire new customers.
In a move to ensure its relevance in a strong growth segment, Stripe has partnered with companies in several markets: Europe, the US and Australia with leading providers including Clearpay, Klarna and Affirm. Stripe must, however, tread a careful path as it looks to balance market relevance in a fast growth sector, against the attention of regulatory bodies motivated to protect consumer safety through potential revenue damaging regulation.
2022 - Web3 & Digital Currencies
The growth of Web 3 and the rapidly declining use of cash is fuelling a growing interest in privately issued digital assets. Central banks are also looking to establish greater local governance over increasingly global payment systems.
Nearly ninety percent of the world’s central banks are pursuing central bank digital currencies (CBDC), a form of digitally issued public money to stand at the forefront of central bank innovation in the monetary space. There is an opportunity to harness emerging blockchain payment solutions and exploit opportunities for public and private partnerships which facilitate fiat-to-crypto payments.
So in 2022, Stripe made its move, launching a fiat-to-crypto widget that can be embedded in any crypto product for use in another Web3 product. Establishing a foothold in the future decentralised payments infrastructure, for customer and business transactions on Web3 should be a key priority for Stripe. Current activity suggests they are already working to build the ‘road infrastructure’ for the future of decentralised payments.
Key Takeaways
Over the past 2 years, Stripe has navigated turbulent external and internal waters. Their flexible approach to innovation and adoption of new technology, either through acquisition or self production, gave them a unique advantage as they dealt with changing macroeconomic conditions. In so doing, they have leveraged and ridden the momentum of new industry trends.
Stripe employed a number of techniques when identifying, building and scaling new products. These same principles also enabled them to capitalise on the emerging opportunities and trends in a fast growing market.
Building focused, technologically agile products
Stripe’s focus on the core mission of ‘making payments easier’ and their commitment to understand their customers in detail, allowed them to identify where new product opportunities lay, but crucially develop solutions that had significant scope to scale.
When building a new product, Stripe produced simple, efficient and flexible technological solutions. Customers were therefore able to easily integrate a new Stripe product into their existing platforms. This facilitated fast adoption and expedited the product refinement process. It also enabled them to scale the rollout of new products at pace.
Stripe leveraged its diverse customer base to identify new pan-global product opportunities as well as to optimise testing and deployment when launching new features or services.
As the global payments value chain evolved, Stripe capitalised on emerging trends and value chains
Stripe leveraged the hypergrowth of e-commerce platforms by providing a simple, scalable payment infrastructure. More recently, Stripe Treasury has facilitated embedded finance solutions for those same e-commerce platforms as Banking-as-a-service becomes the de-facto model.
As the global payment value chain evolved, Stripe prioritised making investments in and partnering with other emerging solutions. Notably securing partnerships with buy-now-pay-later providers and those providing B2B cross-border payment solutions.
Perhaps Stripe’s true test comes now, as the structural tension of being “micro pessimists and macro optimists”, so crucial to their resilience and success to date, must cautiously navigate trends that are increasingly legislated, the potential scrutiny of the public markets, and plethora of nimble, new entrants to the market.