The untold story of Stripe, the secretive $20bn startup driving Apple, Amazon and Facebook

Patrick and John Collison have democratised online payments – and reshaped the digital
economy in the process
On a hot summer’s day in a lush, green Cairo garden just a stone’s throw from the Nile, 29-year-old
Mostafa Amin is talking about bread. He’s speaking with the kind of reverence usually reserved for
celebrities, football teams or minor miracles like manna - the small, doughy rolls dropped from on
high to help the Israelites flee the Pharaoh, according to the Bible.
“In Egyptian Arabic, we call bread ‘aish’, which translates as ‘life’,” Amin explains. “We are a
culture of bread - not rice, not meat or potatoes. Most of us eat Egyptian baladi bread with all three
meals across the day. Last year we were the world’s number-two consumer of flour and we produced
– not consumed, okay — 28 billion loaves of baladi. It’s important.”
Indeed, bread is more than just food in Egypt – it’s history, glory, anger and revolution. The first ever
loaf of bread was baked in Egypt 10,000 years ago, thanks to the quern, a technological innovation
that allowed nomadic people to crush grain. The Nile delta, at the height of the Roman Empire, was
the bread basket of the world. Across the 20th century, every drop in the bread subsidy in Egypt, a
country where 45 per cent of the population earn around $2 per day, caused huge public protests. On
17 January 2011, a baker called Abdou Abdel Monaam set himself on fire in the port city of
Alexandria over the price of bread, sparking an uprising that kickstarted Egypt’s Arab Spring and led
to the fall of President Hosni Mubarak’s government.
In this context, launching Breadfast, a home-delivery startup promising fresh loaves delivered to by
5am, was a no brainer to Amin: a huge population, bread’s enormous popularity and a service that
could grow quickly into the Ocado or Amazon Fresh of Egypt and on into the rest of the Middle East.
But, in north Africa, it’s not quite that easy. “Egypt has political instability, soaring inflation and high
interest rates.” Amin says. “If you go to an investor right now, they’ll ask why they should put money
in a startup while they can put it in the bank and get 15 per cent? There are probably ten investors in
the whole country with vision beyond wanting 90 per cent of your company for $200,000. Most of
the rest are real estate investors who want a quick return.”
Amin is not used to this way of thinking. In 2014, he moved to Berlin for a couple of years Berlin to
earn some cash as a coder and there the startup philosophy was, as he puts it, “reach the first million
in your user base, and then see how you can monetise. But in the Middle East, we don’t work like
that. From day one, investors want you to show something tangible. They don’t speak about the next
generation, they want to talk about something basic people will pay for on the spot.”
Since the 2011 revolution, Cairo has experienced a dramatic increase in young entrepreneurs like
Amin. Almost 30 per cent of Egyptians live below the poverty line, while millions hover just above
it. After years of energy subsidy cuts, tax increases, austerity measures and currency flotation, these
entrepreneurs offer one of the best hopes for the country to achieve Harvard University’s Center for
International Development’s hopeful predictions of annual growth rate reaching 6.63 per cent by
2026.
“Egypt has one of the best strategic locations in the world,” Amin points out, sheltering under a tree
from the heat of the midday sun and sipping a cold bottle of water. “We have 100 million people and
if you give these people a proper education, you will create lots of impact. This country is a treasure.
But we have terrible infrastructure, short sighted investors, zero management and zero vision. Those
are our problems.”
They’re problems prevalent across the region – and across the developing world — but so are the
communities of dynamic digital entrepreneurs trying to do something about it. The isolated
Palestinian city of Ramallah, for instance, hosts a tech park and co-working spaces which helped
launch the Middle East’s booking.com Yamsafer, wearables company Insolito and the demure
lingerie startup Kenz Woman, despite frequent electricity failures, a creaky 2G mobile network, and
an unstable political situation that has lasted for decades.
According to the World Bank’s Small and Medium Enterprise Department, there are between 365
and 445 million micro, small and medium-sized enterprises in emerging markets, contributing up to
60 per cent of employment and up to 40 per cent of national GDP. The main problem these
companies face is access to finance. So how can entrepreneurs from emerging nations join the global
market and help lift the wealth of their nations? One of the solutions comes from a small village in
Ireland called Dromineer, of population 102 and the birthplace of the world’s youngest self-made
billionaires, Patrick and John Collision.
Dromineer looks like a picture-postcard cute Irish village – there’s a couple of low, whitewashed
pubs, a few shops, two hotels serving the tourists who come for the boating and a dilapidated 11th
century castle that towers over the place. The nearest main road is over five miles away. In the
summer, the marina buzzes but in the winter the place is quiet. It’s the perfect setting for a Richard
Curtis movie where Hugh Grant arrives, makes awkward mistakes and falls in love with a local girl.
It’s also where Patrick and John Collison, learned to code – and where they began to think about
online payments. It’s where they began laying the foundations for Stripe, their payments company
valued at $20 billion when it last raised money in September 2018 and which handles payments for
Amazon, Booking.com, Lyft, Deliveroo, Shopify, Salesforce and Facebook.
“To say Dromineer is rural is understating it,” John Collison explains. “We went to school about 40
minutes’ drive away and there were fewer than 20 kids in each class.” The brothers found school
boring. Their father, Denis, trained as an electronic engineer and mother, Lily, as a microbiologist,
and the technical chat round the family table outstripped anything they learned in class. They were
fascinated by maths and physics. By their early teens they had nine computers at home and were
paying €100 a month for a satellite broadband link via Germany.
Patrick – the redheaded older brother, now 30 years old – used to smuggle science and history books
into class to read during the more tedious lessons; “you could try to pound your head against the wall
and think of original ideas…  or you can cheat by reading them in books.”
At 16, Patrick won the Esat BT Young Scientist of the Year – Ireland’s annual school students’
science competition held by the Royal Dublin Society – with his coding language Croma, a new
dialect for LISP, the second oldest programming language still in widespread use. At the end of the
ceremony, the Irish president Mary McAleese took the microphone and marvelled – “he’s a fourth-
year student. A fourth-year student! Can you believe it?”
That year, Patrick studied Ireland’s two-year Senior Cycle for his high school Leaving Certificate
while at home, condensing the work into a 20-day period, acing 30 exams, then running a marathon
to celebrate. He enrolled at MIT in 2006 based on an SAT he’d taken at 13.
John – the dark haired younger brother, 28, wasn’t far behind. On the way to scoring eight straight
A1s in his Leaving Certificate, he spent his Transition Year – an optional time out from Irish
education for 15 year olds – with Patrick in the US, where, aged 17 and 15 respectively, they
launched their first startups: Auctomatic – a software-as-a-service platform for eBay power sellers to
track inventory and traffic – and an iPhone app providing an offline copy of Wikipedia, pitched by
the brothers as Hitchhikers Guide to the Galaxy on the iPhone.
“It was amazing to us that two kids in Ireland can start a business with customers around the world,”
John explains. “Our dad ran a hotel for a while, and our mum started a company that did employee
training, but they were just starting a business – they weren’t entrepreneurs, so we had no-one to ask
about what we were doing. What we did discover pretty quickly was that the hardest part of starting
an internet business isn’t coming up with the idea, turning the idea into code or getting people to hear
about it and pay for it. The hardest part was finding a way to accept customers’ money. You could
share a photograph on Facebook but you couldn’t move money around in the same way. It felt like
you were in the dark ages.”
In 2007, when the brothers were coding their APIs, online payments were supposed to have been
solved. Elon Musk, Peter Thiel and Max Levchin founded PayPal in 1998, which was bought by
eBay in 2002 for $1.5 billion. The fintech ‘revolution’ that followed, however, wasn’t much of an
uprising but more of a spot of portfolio diversifying by some banks that laid down the payment rails
any eager startup had to ride on. The banks still verified identity and owned the account for cards and
payments drew from.
“The problem has always been the layers of intermediation,” explains Chris Higson, a professor of
accounting at the London Business School. “The annual cost of financial intermediation in the US is
roughly 2 per cent – the same as it was in the late nineteenth century. The US finance industry has
showed no efficiency gains at all over 130 years.”
For years, the growth in e-commerce outpaced the underlying payments technology: companies
wanting to set up shop had to go to a bank, which processes payments, and setup a gateway to
connect the two. This takes weeks, lots of people, and fee after fee. Much of the software in place
was decades old and written by banks, credit-card companies and financial middlemen.
Paypal – designed to simplify payments – actually made this worse. The company infuriated startups
with its restrictions – once turnover hit a certain level, Paypal automatically put the business on a 21
to 60 day rolling reserve, meaning that up to 30 per cent of a company’s revenue could be locked up
for up to two months. Developers had to choose between this and complex legacy systems built by
banks.
“For us it was quite visceral: these products are not serving the needs of the customers, so let’s build
something better,” John Collison argues. “In old-fashioned legacy companies it’s the CFO choosing
the payments system. They think all systems are alike, so they just sort the bids from suppliers. But if
you’re a developer building the next Kickstarter, or the next Lyft, and you have a two-person team,
both of you writing relatively complex code and solving complex infrastructural problem, you need a
simple payments API that – once installed – doesn’t keep changing.”
In 2008, Patrick and John sold Auctomatic to Canada’s Live Current Media for $5 million – making
them teenage millionaires – then went back to university, MIT and Harvard respectively. They began
tinkering with the idea of focusing on software developers – the people actually building the sites and
apps. They came up with seven simple lines of code that anyone could insert into any app or website
in a day to connect to a payments company. A process that used to take weeks was now a cut-and-
paste job.
In 2010, the brothers dropped out of college and launched Stripe in San Francisco with seed funding
from accelerator Y Combinator. The company offered seven lines of code and a promise that no other
changes were needed. Developers who integrated the Stripe API wouldn’t have to touch it for years.
In the early days, the brothers cycled to the office to save money. In 2011, they approached Peter
Thiel and Elon Musk.
“It’s a little impetuous to go to PayPal founders and say payments on the internet are totally broken,”
says John with a wry smile. “But look, you can WhatsApp anyone around the world and it’s free. It’s
a remarkable act of co-ordination between the telcos and ISPs and the people who own the fibre
underneath the sea to create this global communications network. Then, if you look at the economic
infrastructure, we haven’t even started.”
The two brothers pitched a vision of more internet commerce, driven by more connectivity and it
being easy to use. “That had been the original vision of PayPal, but they hadn’t actually made it
happen, so I think they got us, in a way that a lot of people didn’t,” John says.
Thiel led a $2 million series A round with Sequoia Capital and Andreessen Horowitz. The company
grew swiftly, driven largely by word-of-mouth between developers. Marketplace builders such as
Shopify and sharing-economy newcomers like Lyft needed to manage payments between a large
number of small suppliers, home owners or drivers and thousands of customers in the time it took to
press a single on-screen button. Setting up accounting platforms to manage these incoming and
outgoing payments would have taken six months to build. Stripe processed payments through its own
servers, allowing payers and vendors to connect with minimum fuss.
Developers approved. Stackshare, the developer’s platform where companies such as Slack, Spotify
and Opendoor post lists of every piece of software they’re using, has a running vote comparing
Adyen, Braintree and Stripe. Adyen – which describes itself on the site as “a payments-technology
company that provides a single global platform to accept payments anywhere in the world.
Businesses can process payments across online, mobile and in-store (POS) with over 250 payment
methods and 187 currencies” – has 23 fans, is a favourite for 11 developers and has some 39 upvotes
as of July 2018. Braintree – which says it “replaces traditional payment gateways and merchant
accounts. From one touch payments, to mobile SDKs and international sales, we provide everything
you need to start accepting payments today” – does a little better with 130 fans, 29 favourites and 87
up votes. Stripe — which on the website describes its goal simply as making it “easy for developers
to accept credit cards on the web” — has 1,360+ fans, 170 favourites and 1,500+ votes.
In short order, Stripe signed deals with Lyft, Facebook, DoorDash, Deliveroo, Seedrs, Monzo, The
Guardian, Boohoo, Salesforce, Shopify, Indiegogo, Asos and TaskRabbit. The company won’t
disclose its payments volume but says it processes billions of pounds a year for millions of
companies.
Over the past year, 65 per cent of UK internet users and 80 per cent of US users have bought
something from a Stripe-powered business, although very few of them knew they were using it.
Where PayPal injects itself into the checkout process, Stripe operates like a white-label merchant
account, processing payments, checking for fraud and taking a small percentage: 1.4 per cent plus 20
pence for European cards and 2.9 per cent plus 20 pence for all others. The buyer sees the seller’s
name on their credit card statement and, unless the merchant specifically chooses to deploy the Stripe
logo, that’s all they’ll ever see.
“It’s not the cheapest provider but it does remove all other intermediaries so it’s the only fee you’ll
pay,” Hodges explains. “And if that’s all they did, they’d be interesting. It’s what they did next that’s
revolutionary.”
“For many years Stripe had been trying to work out how to deal with what seemed like an obvious
opportunity,” explains Billy Alvarado, Stripe’s chief business officer. Alvarado grew up in Honduras,
where, in 1998, Hurricane Mitch took out all three bridges in the capital city. “Suddenly you had
men, women and children, literally in rubber boots with these pads on their shoulders selling piggy
backs across the river to men in suits and women in work clothes,” he recalls. “If you go to any
country, you see entrepreneurship everywhere. A lot of these entrepreneurs would love to launch a
global internet business. They find it difficult to trade on the world market – but these are literally
millions of nascent businesses. We were just trying to work out how we can help them do that
simply.”
On February 24, 2016 the company launched the Stripe Atlas platform, designed to help
entrepreneurs start a business from absolutely anywhere on the planet. The invitation-only platform
allows companies from the Gaza Strip to Berwick-upon-Tweed to incorporate as a US company in
Delaware – a state with such business-friendly courts, tax system, laws and policies that 60 per cent
of Fortune 500 companies including the Bank of America, Google and Coca-Cola are incorporated
there for just $500.
That idea, in a sense, could only come from someone from a place as remote as Dromineer, Ireland,
and with a clear sense of how it feels to be so far from the action. At its core was the ambition to
“increase the GDP of the internet,” according to Patrick in his February 2016 launch speech at the
Mobile World Congress in Barcelona. Stripe, he explained, was targeting entrepreneurs from Africa,
Latin America, the Middle East and parts of Asia. “A majority of the growth over the next ten years
will come from underserved markets,” he explained. “That includes about 6.2 billion people we don’t
reach yet, and that’s a huge missed opportunity.”
Dana Khater is 24. Born in Egypt, she grew up in Dubai and studied at an international school until
she was 11. You can still hear traces of her schooling in her soft, almost-American accent. After her
father died, she returned to Cairo and spent a “few years arguing about my education” with her
mother.
“I originally wanted to go to university abroad,” she explains with a light smile, sipping coffee in
Holm Café, a Scandinavian style coffee shop in the affluent west Cairo Zamlek district. “I got into
McGill but my mom didn’t let me go – I was 16 at the time and she said I was too young to live on
my own. Throughout the first year I’d keep picking out different things that I found at McGill that
didn’t exist at my university – and one of the things was a fashion magazine. She was sick of me
talking like this and said ‘well, start one’. So I did.”
The fashion-centric magazines in Egypt mostly published translations of Vogue articles. Khater
wanted to focus on Middle East brands – Cairo designer Amina K. had just had her first catwalk
show at London Fashion Week and the city’s fashion scene was growing. Khater and her team
learned to style shoots, borrowing clothes from stores that sold copies of the magazine in return for
the publicity. She ran the magazine for two-and-a-half years – she never did go to McGill – until the
revolution broke out in 2011. Cairo’s restive streets filled with protestors, military vehicles, mass
pray-ins, riot police and blazing armoured cars until President Mubarak resigned.
In the months that followed, the old order stepped warily around the new. Dana took a job at Ego, an
upmarket department store that had purchased all its stock before the revolution. “Post-revolution, no
one knew what was going to happen, so no one was really spending on luxury goods,” she explains.
“We had a lot of product that was sold out on Net-a-Porter but was just sitting on our shelves. The
people that were spending were coming into the stores and asking for non-branded plastic bags. No
one wanted to be seen spending.”
Khater suggested that Ego launch its own e-commerce site but they turned her down, so she decided
to turn her magazine into a platform showcasing and selling emerging brands. Coterique went online
in February 2013. The site’s first order came from New York and the second came from LA, and
before she knew it, she was effectively running a global business. Coterique was selling brands from
12 different countries – including Egypt, Dubai, Lebanon, the UK, Australia and Turkey.
Then, in 2016, the government devalued the Egyptian pound to secure a $12 billion loan from the
International Monetary Fund, prompting soaring inflation and rising borrowing costs. Prior to the
devaluation, $1 was officially EGP6, but on the black market closer to EGP9 or 10. After
devaluation, $1 soared to EGP17 overnight.
“A lot of our brands and customers were outside of Egypt,” Dana explains. “We were getting
payments from customers in EGP, but my brands in New York needed paying in dollars. No one
wanted to dabble in foreign currency, so we had to withdraw the EGP from the bank, go to the
currency exchange on the black market, redeposit the dollars and lose a lot of money every time.”
She heard about Stripe Atlas from an early stage investor in her company. Crucially, Atlas allowed
Coterique to set up as a US based C-Corp – a business taxed separately from its owner’s income –
with a Silicon Valley Bank account that could receive payment in US dollars.
“Before we could accept dollars, we were only taking payments in Egyptian pounds,” she explains.
“If you live in London and you really like a dress, you Google EGP to figure out what currency that
is. You see Egypt. Everything you see on TV says that Egypt’s unstable. You don’t know if that
means that you’re actually going to receive your dress and suddenly you’re not interested. Atlas
saved our business.”
For Mustafa Amin, Atlas offered a solution to his perennial problem – no-one wanted to invest in
Middle Eastern companies, “because the instability meant they doubted our legal system – to protect
their money, they need to have a strong legal system.” Since BreadFast became a US company, Amin
has already landed funding from Silicon Valley venture fund 500 Startups.
Today, 20 per cent of tech-based Delaware C-Corps started on Stripe Atlas. Alvarado oversees the
partnership between Atlas and Silicon Valley Bank. For him, building Atlas is a visceral part of his
own personal story – his father grew up in poverty in Honduras and he was born into difficult
circumstances.
“My grandfather was a street hustler,” he explains. “When my dad was 18, my grandfather gave him
the equivalent of $2 and said ‘take care of your mum and brother.’ He started as a janitor in a bank
and slowly made his way up until he was working for someone doing credit reviews. That person got
a job at Citibank, took my dad with him and he suddenly became a professional. That paid for our
college in America – but everything had depended on the decision of that one person. I don’t think
helping emerging markets should be a matter of chance.”
Of course, Atlas isn’t a charity. Payments is a notoriously tight-margin business and growth is
complicated in established markets. Alvarado points to forecasts saying 70 per cent of internet
commerce is going to come from emerging markets – “so, it’s important that we start doing it now or
people will solve it for themselves and come up with a way to pay and borrow.”
Not everyone approves. “In a developing world context, Stripe Atlas has its benefits for disruptive
SMEs located in the most conducive development markets and for those companies the business case
is clear,” says Dr Nadia Millington, deputy programme director in social innovation and
entrepreneurship at the London School of Economics. “However, the majority of SMEs cannot deal
with the complexity associated with registering and maintaining a US C-company. Challenges
include double taxation, onerous repatriation rules and an inability to establish control structures that
are required to run multi-country businesses. The concept of the internet of the GDP is intriguing
philosophically, but the underlying assumption that this will benefit a wide range of SMEs in
emerging markets is a stretch. There’s a host of structural, institutional and social barriers which must
be addressed in parallel.”
One solution is the platform model. Over the past five years, businesses including Amazon and Uber
– all Stripe clients – have built multi-billion-dollar businesses at speed, disrupting industry after
industry with a platform business model that’s open, connected and rapidly scalable, allowing them
to create entire ecosystems of developers, customers and suppliers.
Platforms allow everyone to trade on largely neutral terms – connecting millions of sellers across the
world. One in four marketplaces on Stripe pay sellers outside their home country. For the brothers,
this is only the beginning. In July, Stripe entered the credit-card business – helping their business
customers issue cards to employees using existing Mastercard and Visa rails. Their devotion to the
founders of the internet means they’re out to rectify one horrible mistake made in setting the whole
thing up.
When you arrive at Stripe’s offices, in San Francisco’s former waterfront SoMa district, you take a
seat in reception by a coffee table covered in magazines and books. There are issues of Paris Review,
engineering magazines, the Twelve Tomorrows sci-fi anthology, research journals, a handful of
novels and a few scattered copies of Increment, Stripe’s quarterly magazine founded by Susan
Fowler, a former Uber employee whose February 2017 blog alleging a corporate culture of sexual
harassment at the ridesharing company set off an internal investigation that led to CEO Travis
Kalanick stepping down as CEO. Fowler joined Stripe more than a month before publishing the blog
post and left Stripe, for the New York Times, earlier in 2018.
This is a very deliberate introduction to the company’s thoughtful culture. The books Patrick Collison
used to smuggle into lessons included lots of biographies of computing pioneers such as Stanford
Research Institute engineer Douglas Engelbart – who, by 1968, had invented the mouse, real-time
collaboration, video conferencing and live syncing of documents with video conferencing, and MIT
professor John McCarthy – who coined the term “artificial intelligence” in 1955 and, in 1958,
published coding languages that could drive AI data searches.
“So much of this early work is better than what we have today,” Patrick told a class at Stanford
University in 2015. “Sure, we have solved all kinds of scaling issues, deployments, technology — but
the core problems of helping people work together were thought about more back then. Their concept
of technology was about empowering humans.”
Today, his bookshelf is stuffed with everything from War and Peace to the Wealth of Nations. He
lists almost 600 titles in a “recommended reading” list on his personal website. From this, he pulls
out 70 “above average” titles – including a few books on China, Africa and the Middle East; a
number on technology and climate change; Betty Friedan’s 1963 feminist classic The Feminine
Mystique; Spacetime and Geometry: An Introduction to General Relativity; as well as Dracula and
the Count of Monte Cristo.
There’s also 20 labelled “particularly great” – including books on imperialism, engineering and
democracy as well as Nick Bostrom’s Anthropic Bias and Rebecca Goldstein’s libidinous philosophy
novel The Mind-Body Problem. One of those 20 greats is special: The Dream Machine: J.C.R.
Licklider and the Revolution That Made Computing Personal, by Nature editor M Mitchell Waldrop.
This particular book shapes Stripe’s soul – it was out of print for years until Patrick bought the rights
and republished it, handing out free copies to every staff member and to anyone who visits Stripe’s
headquarters.
The book is a sprawling history of the ideas and individuals that got us from punch cards to personal
computers. Taking in everyone from Alan Turing to Tim Berners Lee, the book focuses on Licklider,
a visionary polymath psychologist from Missouri who, during his career at the Massachusetts
Institute of Technology and the Pentagon, mentored Robert Taylor – who implemented Licklider’s
ideas of a computer network as the ARPAnet that ultimately evolved into the Internet – Douglas
Englebart and many of those who created computing as we know it.
He envisaged a man-computer Symbiosis – a collaborative connection between people and
technology. Building Licklider’s Dream Machine fell to the mavericks, the outsiders and the rebels at
MIT, Carnegie Mellon, UCBerkeley, RAND, BBN, SRI and Xerox PARC. The Collison brothers
love the messy, chaotic and unexpected nature of Licklider’s gang.
“One reading of the Dream Machine, the take away certainly that we had, is how accidental the
whole thing seemed,” John explains, sitting in a glass-fronted office in Stripe’s headquarters. “How
easily it could not have happened and how much it relied on a set of very motivated people who
really believed in the long-term idea, pushing it through. That’s one important lesson to take away –
this thing that has been so impactful for so many people… was it inevitable? It’s not obvious that it
was.”
When Berners-Lee and his team were building the world wide web and designing HTTP and HTMP
standards, they included error codes such as “500: internal server error”, or “404: page not found”. In
the early 90s, they were trying to realise Licklider’s vision and setting out the rules for how we were
all going to interact over this information network. One long-standing error code is “402: payment
required”. The original intention – the reason 402 is reserved for future use – was that this code
would be used to transact digital cash or micropayments. It has never been implemented – and the
Collisons argue this is the reason tech is turning from an equal access opportunity to an oligopoly
controlled by five companies now worth more than $3 trillion.
“The idea driving 402 was that it’s obvious that support for payments should be a first-class concept
on the web and it’s obvious that there should be a lot of direct commerce taking place on the web,”
says John “In fact, what emerged is a single dominant business model which is advertising. That
leads to a lot of centralisation, because you get the highest cost per clicks and with the largest
platforms. A big part of what we’re trying to do with Stripe is continually make it easy for new
business to start, and for new businesses to succeed. Having commerce and direct payment succeed
on the internet is a very important component of that. It’s the final piece in the Dream Machine.”
https://www.wired.co.uk/article/stripe-payments-apple-amazon-facebook