Stripe - Lessons from Patrick Collison

What is Stripe?

Stripe is a financial technology company that provides payment processing software and APIs to online businesses and mobile developers. Founded in 2010 by Patrick and John Collison, Stripe aims to make accepting online payments extremely simple and seamless, allowing entrepreneurs to focus on their core product instead of the complexities of payments infrastructure.

Stripe handles everything from currencies to fraud detection for online transactions, acting as a middleman between businesses, consumers, banks, and credit card networks. The company has quickly become one of the largest payment processors globally. Stripe charges a small fee per transaction and has raised funding from investors including Sequoia Capital, Andreessen Horowitz, and Peter Thiel.

Stripe helps entrepreneurs start and scale their online businesses by removing the burdensome complexities of accepting online payments. Its software and APIs make it easy for companies to handle transactions in over 100 countries.

Stripe’s Founding Story

Patrick and John Collison grew up in rural Ireland with entrepreneurial parents. They built their own websites and online businesses from a young age. While still teenagers, they founded a company called Auctomatic which they built and sold for $5 million in under a year. After briefly attending Harvard and MIT, the brothers started discussing the difficulties of accepting payments online compared to mobile apps.

In late 2009 they conceived of the initial idea for Stripe, dropped out of college, and spent a month building the first prototype in Buenos Aires. They aimed to make accepting online payments extremely fast and simple for small businesses. With Patrick as CEO and John as President, the Collisons have built Stripe into a leading global payments company valued at over $35 billion as of 2019.

Stripe’s Minimum Viable Product

Patrick and John built the initial Stripe MVP in late 2009 during a one month stay in Buenos Aires. They started by calling a friend at a payment processing company to manually set up accounts for their first couple users. This allowed them to build an initial prototype focused solely on the clean API and interface for easily accepting payments, without integrating actual financial infrastructure. Their first user, Ross Boucher, requested they actually transfer money to his bank account, so the brothers continued iterating based on direct user feedback.

Given the immense complexity of global payments infrastructure, Patrick and John decided to narrow the scope of their MVP to just the software side first. By faking the back-end integration initially, they could quickly build and gather feedback on the core user-facing elements. They spoke with users repeatedly to understand pain points and rapidly modify the product in response. For example, after seeing users struggle to find buttons, they redesigned the interface. This tight feedback loop was key before they tackled the daunting task of actually connecting to banks and payment networks. Patrick believes optimizing the speed of useful iteration with engaged users is critical before product-market fit.

Product-Market Fit

Patrick states that Stripe reached product-market fit around the time they publicly launched in September 2011 after almost 2 years of development. By that point, they had rebuilt major components like the API multiple times based on user feedback during the beta period.

When they opened up publicly, demand for Stripe spiked dramatically, validating that their solution resonated with the market. Patrick notes that pre-product-market fit, startups should focus on optimizing and retaining a subset of users. Post-product-market fit, the challenges flip to scaling up to meet demand. Stripe shifted from iterating on their product to remove friction to building up their systems and organization to handle incoming volume.

Reaching product-market fit showed Patrick and John they were solving a real market need.

Growth Strategies

Here are some key strategies Patrick and John used to gain Stripe's first users and scale the business over time:

Direct outreach to friends in the startup community: Some of Stripe's first users came from friends in Y Combinator and the broader startup ecosystem. Patrick and John could speak directly with them about pain points accepting payments.

Word-of-mouth through early adopters: As Patrick notes, once they reached product-market fit after launch, their initial 500 users generated buzz and word-of-mouth that drove rapid adoption. Happy early adopters shared Stripe with peers.

Focus on developers: Patrick aimed to build Stripe's brand among developers and technical founders early on through high quality engineering blogs, open source projects, and tools like developer-focused APIs.

Targeting startups: Stripe's developer-friendly payments platform resonated with early stage startups looking to quickly add payment processing. Patrick notes they mapped expanding concentric circles of customers from startups up to bigger companies.

Improving the user onboarding experience: The initial prototype focused heavily on ease of use, setting up accounts quickly. This helped convert initial users.

Expedited feedback loops: By monitoring everything early users did via metrics and feedback forms, Patrick could quickly improve Stripe to remove friction.

Outstanding customer support: Quickly resolving issues and refunding errors via dedicated email support helped drive positive word-of-mouth.

Conservative media approach: Patrick notes Stripe avoided most press early on and let viral growth do the work, only opening up to media over time.

Remote engineering hubs: Recently Stripe has added product development hubs globally to tap wider talent pools and serve users worldwide.

Broadening products: Over time Stripe has expanded its payments platform into issuing corporate cards, fraud protection, and business incorporation to further monetize existing users.

Stripe Funding History

Stripe raised an initial seed round from Y Combinator and angels like Peter Thiel shortly after launching in 2010. In 2012, they secured further funding from Sequoia Capital and Amex Ventures. This 2012 round valued the company at $1.7 billion.

Just two years later in 2014, Stripe raised another round that nearly doubled its valuation to $3.4 billion. The company's latest 2019 funding round raised $250 million at a valuation of $35 billion.

Stripe has managed to rapidly scale and grow its valuation with relatively few large funding rounds from top-tier investors who believe in the massive potential for online payments.

Hiring & Culture

Here are some of Patrick's insights on hiring, teambuilding and culture:

Hire for difficult problems - Great people are attracted to solving truly hard, complex issues. Stripe's payments challenges resonated.

Take time to be selective - Patrick spent almost 2 years carefully recruiting Stripe's first 10 employees. He assessed candidates by working directly with them first.

Prioritize talent over experience - Patrick hired smart people with the right fundamentals even if they were inexperienced. Skills could be learned.

Seek referrals from early hires - Because top people attract others, Patrick looked for well-regarded hires to reinforce Stripe's talent brand.

Allow anyone to veto hires - To avoid bad fits, any Stripe employee could veto hiring candidates after assessing them extensively.

Give more equity to early team - Patrick advises being very generous with equity to align early hires with ownership and retain them.

Preserve autonomy as you scale - Stripe tries to maintain independent decision-making through transparency tools like email visibility.

Rotate new hires through teams - To combat silos, new engineers work in all departments before specializing. This builds cohesion.

Foster pleasant, happy culture - Patrick screens for intrinsically happy people to avoid cultural toxicity and drain.

Discuss and evolve culture deliberately - Regular processes at Stripe like "org hack" meetings identify and fix cultural issues.

In summary, Patrick obsesses over recruiting top talent, encourages ownership via equity, and perpetually works to combat silos and toxicity as Stripe scales.

Challenges & Setbacks

Some key challenges and setbacks the Collison brothers faced building Stripe include:

Lack of industry expertise early on - As first-time entrepreneurs in fintech, Patrick and John lacked experience with financial infrastructure and regulation. Hiring their first business development lead, Billy Alvarado, helped overcome this.

Consensus-driven decision making - Patrick believes Stripe delayed decisions too often by requiring full consensus in the early days. He learned they needed more top-down leadership as they scaled.

Over-optimizing operations pre-product-market fit - Patrick notes he focused too much on designing Stripe's long-term org structure before finding product-market fit. More time should have gone solely to the product initially.

Underestimating the management team - Patrick did not focus enough on building a strong management team early on. He later realized this team would drive much of the company's success.

Sacrificing engineers to management - Promoting Stripe's top engineers to management roles improved operations but removed strong individual contributors from engineering.

Geographic concentration - Keeping nearly all employees in San Francisco early on limited Stripe's talent pool and global perspective. Patrick has since embraced remote hubs.

In general, Patrick learned to focus obsessively on the core product, users and market need first before scaling the organization. He also embraced the unpredictability of running a company requiring flexibility.

Key Takeaways

Here are some key insights about building a successful company from Patrick Collison:

Focus on solving a difficult, overlooked problem. Patrick started Stripe because accepting payments online was incredibly complex for small businesses in 2010. The fintech space was fragmented and antiquated.

Talk directly to users early and often. Patrick spoke with users repeatedly in Stripe's early days to understand pain points and iterate quickly. He believes optimizing the speed of useful iteration is critical.

Hire carefully and slowly. Patrick took his time building an exceptional early team, working extensively with promising candidates before hiring them. He believes the first 10 hires are disproportionately important.

Give early employees more equity. Patrick advises being very generous with equity for early team members who take big risks to build the company with you.

Structure the organization to preserve speed. As Stripe grew, Patrick tried to combat complexity and maintain quick iteration and decision making. Things like email transparency and remote engineering hubs help.

Stay flexible. Patrick changed his mind on remote work and company structure over time based on Stripe's needs, even if it contradicted conventional wisdom.

Build a happy and fulfilling culture. Patrick believes happiness is complex, but creating a workplace focused on meaning and fulfillment attracts top talent.

Make bold bets. Patrick took risks on remote hubs, generous equity, and hiring more slowly and carefully. He believes ambitious bets that could accelerate progress are worth trying.

In summary, Patrick focused on solving a major problem, iterating quickly based on user feedback, hiring very carefully, and preserving speed and culture while scaling. He made bold bets and stayed flexible, contributing to Stripe's success.

Conclusion

Stripe's journey demonstrates how two ambitious founders identified a massive yet overlooked problem - online payments - and methodically built a global company to solve it.

Patrick and John Collison designed Stripe from the ground up to remove all friction for online businesses to accept payments anywhere. They focused maniacally on serving users, gathering feedback, and iterating rapidly in Stripe's early days. Though the task was daunting, they took bold risks like generous equity sharing to recruit superstar technical talent interested in hard problems.

Patrick was flexible on remote work and other policies as priorities evolved. He made culture an "organizational product" measured and optimized over time. Thoughtful long-term thinking underpinned everything even during short-term crunches. The Collison brothers' patient and obsessive approach grew Stripe into a multibillion dollar payments juggernaut and one of Silicon Valley's great startup success stories.

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