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The Story of Stripe: How Teenagers Changed the World of Online Payment

Stripe

This is the story about two teenage brothers from Ireland - Patrick and John Collinson, who solved the online payment problems once and for all - using their wild coding talents.

When you hear stories about geniuses with world-changing ideas that made billions, you don’t expect the story to begin in an Irish village with a population of 105.

Well, this one does.

The Irish Village of Dromineer - Where the Journey Began

Patrick and John grew up in a family of scientists in Dromineer, a tiny Irish village. Their mother was a microbiologist, and their father an electronic engineer. They were the type of family who paid €100 per month for a satellite broadband link via Germany to keep up with European news and shows, and usually discussed the latest trends in science and technology over their dinner table. The boys’ school was a 40-minute drive away, and it was a very small one, with fewer than 20 kids per class. The two brothers weren’t very fond of school, but it didn’t stop them from being successful. In 2005, Patrick turned 16 and won first prize at the 41st Young Scientist competition, for his amazing work in the Lisp programming language.

By 2007, Patrick had left high school to attend MIT. He enrolled based on an SAT he’d taken when he was only 13!

At the time, his younger brother John was only 15 and warming up to do some amazing things as well.

Their First Company

Over Patrick’s first four months as a freshman, he started working on a company called ‘Shuppa’ along with some help from John. Shuppa never succeeded on its own and was immediately merged with Auctomatic, a company for building tools for eBay, officially founded by Patrick. This Y Combinator-funded startup lasted for 10 months before Live Current Media bought it for $5M. By 2008, Patrick became the Director of Product Engineering at Auctomatic, and John turned out to be Ireland’s best high schooler, scoring the highest score on his Irish Leaving Certificate. In 2009, he enrolled at Harvard University.

From /dev/payment/ to SLASHDEVSLASHFINANCE to Stripe.com

During the first couple of months of 2010, the two brothers began working on the Stripe project. The inspiration for building a simple-to-use online payment platform came from their own experience. At the time, Patrick was hustling several side projects, and he was shocked by the difficulties he had to go through to receive online payments. He shared this problem with John, who saw a challenge rather than a problem - and the idea for Stripe was born!

Before them, Elon Musk, Max Levchin, and Peter Thiel built PayPal, which was later bought by eBay. PayPal was an important milestone in the online payment revolution, but it didn’t really solve most of the problems. The system was too complex and full of restrictions - after you reach a certain turnover level, you go on a rolling reserve that could last up to 2 months! So people had to choose between that and the banks - and no one really likes banks and their expensive intermediation.

The initial idea for the startup’s name was ‘/dev/payments’ because the company’s main focus was building payments API for developers. However, Delaware law (where they were located at the time) didn’t allow leading slashes in corporate names, so they renamed it into SLASHDEVSLASHFINANCE. Well, it turned out that the name seemed pretty ridiculous to anyone outside of their thinking bubble and was too similar to Amazon’s DevPay. So, it had to go, too.

They began brainstorming random nouns and matching them with a .com sequel. With a little help from their email-list friends, the name Stripe.com was finally acquired.

First Customer - First Employee!

It took the brothers 6 months to finish the Stripe prototype, but only two weeks to get their first transaction. It was with the Y Combinator’s company 280 North, founded by Ross Boucher. Ross, their very first customer, soon became one of their first employees.

Further on, they used a three-step approach to acquire additional customers:

  • Focusing on developers - their product was primarily intended to help developers charge their services
  • Identifying market gaps between payment processing options and branded third-party processors
  • Word of mouth!

So, the platform was working, but there were still some unanswered questions:

  • How big is the market?
  • What kind of user experience do we want to provide?
  • How do we address fraud?
  • How do we handle non-US payments?

By November 2010, they both dropped out of college to work on Stripe full-time. Now, you might say - ‘oh no, such potential! Why would such bright minds leave school?’

Turns out, this was the best decision they ever made - besides the decision to start building Stripe in the first place.

The two brothers figured they were onto something huge, but according to their standards, it didn’t look so good on paper and needed some institutional support. That’s when they turned to investment funds. At that point, Patrick was the company’s CEO and John was the president.

Funding Rounds

Their first seeding round came from Y Combinator in 2010 and then again in 2011. It is unknown how much they received in 2010, but in 2011 they were provided with $2M of initial capital. 2012 brought them $18M in series A funding from Sequoia Capital, followed by a series B $20M from the General Capitalist. Since then, they received eight more funding rounds, series C to G, and a G extension. Hundreds of millions of dollars came from different investment funds like the Founders Fund, Thrive Capital, Capital G, General Catalyst, Tiger Global Management, and Andersen Horowitz.

The latest funding they received was $600M in April 2020. It was a combined investment from Sequoia Capital, General Catalyst, GV, and Andersen Horowitz.

During the last 10 years, their team has been working on simplifying the online payment process by cutting all the unwanted clutter that PayPal simply couldn’t address.

Speaking of PalPal, one of the shocking upheavals in the company’s history was turning to Elon Musk and Peter Thiel in 2011 for support. You could say it was a bit pretentious to go to PayPal founders and tell them that the internet payments are just… broken. You can post a picture on Facebook, send messages on Viber and Whatsapp across the globe, for free, but you can’t send money around without turning to banks or losing your nerves with PayPal? Crazy!

As implausible as it may seem, Stripe actually did receive support from the PayPal founders. Stripe was so good, that even their competitors had to support it!

Product Evolution

By now, Stripe succeeded at providing technical, fraud prevention, and banking infrastructure for online payments. As summarized in the San Francisco Chronicle

“Stripe succeeded by distilling the complex, creaking infrastructure of online payments into a handful of lines of code that could be inserted into a clients’ website.”

Over the last 10 years, their product has evolved significantly, as they have managed to answer their most burning questions: simplicity and fraud.

Today, their product set involves several features:

  • Payments: Stripe’s core platform of well-documented APIs or accepting, managing, and processing financial transactions on a national or international level. Super-easy to use and integrate into any e-commerce environment.
  • Connect: helps businesses with building multi-sided marketplaces. It connects them with onboarding marketplace sellers, managing users on the platform, tax support, ensuring that the participants in the marketplace are meeting compliance requirements, international expansion, and so on.
  • Radar:combats fraudulent payments through machine learning algorithms. It tracks multiple payment characteristics, like IP address, card types, shipping location, and many more. Businesses can also use Radar’s tools to manually track suspicious transactions.
  • Subscriptions:allows businesses to automate their subscription billing processes.
  • Sigma: generates stats about businesses to drive decision-making processes.
  • Atlas: provides internet companies with the foundation to incorporate and run their businesses for a flat fee. The companies get the incorporation services, a Stripe account, an instant bank account, founder stock issuance, a tax ID number with ongoing tax support, and a list of other services too.
  • Terminal: offers physical credit card readers specially designed to work with Stripe. As of 2019, it’s available only in the US.
  • Sorbet: open-source type checker for Ruby programming language.

The Stripe brothers did become billionaires by developing this product. Their company is the second-most-valuable US startup.

Today, Stripe employs more than 2000 people, and the company has dozens of open positions at every moment. They work with millions of businesses in more than 30 countries, offering (what they claim are) the fastest and the cheapest online payments.

However, they don’t really charge their users much. Stripe only takes a flat rate of 2.9% and another 30 cents for every successful charge, as long as you don’t cross $1M yearly volume.

If you’re still wondering whether you’ll make it in life and if the world is big enough for you to find your place, just remember that it doesn’t have to be. The Collinson brothers started their journey in a village with a hundred people, and today they’re cruising down Silicon Valley roads.

As history has shown us, it only takes a good nose for problems - and work, work, work!