6 ms·

Memo to Stripe: Winning the hearts of Valley startups is not winning payments

59 points by dzhao 13y ago

noir_lord 13y ago
I don't care if they win or not as long as they are sustainable and stay awesome. I'll use them for my stuff and my business and others can use whatever they want. I literally wouldn't use PayPal if they paid me to use them (in fact I would pay for and setup a merchant account with online payments processing long before I would touch PayPal).
sama 13y ago
Three things: 1) There are almost certainly a lot of inaccuracies in here. I saw a few on a quick skim of the article. 2) Exponential growth is a hard thing for most people to wrap their minds around. The best tech investors--many of which invested in this round--understand it. Most bloggers do not. The former camp has a better track record on valuing companies like these, although of course a lot of investments don't work out. But I would much prefer to give money to the investors in this round to invest for me than the writers of this article. 3) It's easier to spew hate than it is to build value. While bloggers write stuff like this, companies can just ignore it and laugh about it over drinks in a few years.
- untog 13y ago
  There are almost certainly a lot of inaccuracies in here. I saw a few on a quick skim of the article. Like what? It's easier to spew hate than it is to build value. It's also important to provide a viewpoint that isn't just blindly parroting what a party tells you. This is hardly 'hate'.
  - sama 13y ago
    For example, the liquidation preference is a standard 1x, not 2x, which is a very important inaccuracy.
    - pbreit 13y ago
      It says the 2x preference is "incredibly favorable" not "standard".
      - aptwebapps 13y ago
        I believe sama is challenging the number and not the characterization.
- danso 13y ago
  Could you elaborate on the inaccuracies you found? Because your current comment contains not much more than an egregious and bald appeal to authority
- mcarney7 13y ago
  Sama, you may have missed it in your "quick skim" but Stripe isn't actually growing that fast (~50% / yr). Braintree is growing much faster and even stodgy old paypal isn't too far behind in terms of growth rate. For its size and valuation, the growth story is fairly underwhelming. As for the trackrecord and judgement of the investors, no argument that they are among the best. But only Khosla is new money, meaning they are the only one that took significant new risk (although they got plenty of downside protection via liquidation preferences, as we explained). Sequoia and Founders Fund were already heavily invested in Stripe, thus making it a much easier decision to "re-up" in this new round and pad the company's war chest for the highly-competitive slugfest ahead. I/we don't hate Stripe. In fact, I think they're a great company. I just think the narrative around this funding round when it was announced on Wednesday glossed over the legitimate challenges that the company faces.
  - sama 13y ago
    Per my earlier comment, the liquidation preference thing is just completely inaccurate. And the ~50% growth rate comment is just so insanely inaccurate I'm not even sure how to respond. (do have a look at this, though: https://twitter.com/paulg/status/403183731449413632 https://twitter.com/paulg/status/403183731449413632) I/we don't hate Pando. I just think the narrative around this article when it was posted this morning glossed over the legitimate facts the company faces.
    - mcarney7 13y ago
      As I wrote to Patrick above, they've been fundraising and having M&A talks over the last 6+ mo, meaning their numbers are "out there." The figures we reported may be outdated, something that we acknowledged, but I find it extremely difficult to believe that they're wildly inaccurate for the timeframe.
- mcphilip 13y ago
  Basically your comment boils down to "I skimmed the article and it seemed hateful and inaccurate". And then something strange about spotting exponential growth being left to the big boys. On the contrary, I read the entire article and found it useful. The author admits that getting accurate numbers on Stripe isn't possible at this point. I wish Stripe all the best, but it still has a tough road ahead.
  - pg 13y ago
    Sam knows Stripe's numbers. So the fact that he was able to see inaccuracies immediately is more meaningful than the fact that you read the entire article and found it useful.
    - mcphilip 13y ago
      I clicked on his profile before replying just to make sure I wasn't countering someone in the know. I made the wrong assumption.
tomasien 13y ago
Given that Stripe is about to process payments for Twitter, I wouldn't be tremendously worried. As a side note - Braintree was around before Stripe. Remember that. It's not Apples to Apples on their size, it's about growth, and as PG has publicly shared several times, Stripe is growing at a ridiculous rate. https://twitter.com/paulg/status/403183731449413632/photo/1 https://twitter.com/paulg/status/403183731449413632/photo/1
- mcarney7 13y ago
  Agreed that Braintree had a head start and that's not to be overlooked. Also, landing Twitter would be a big coup, and potentially lucrative depending on what kind of commerce they enable. But I'd dispute the claim that they're growing at a ridiculous rate. Everything we've heard puts it close to 50%/yr, which is not great given their size and valuation. Braintree was above 100% last year, Square grew 200%, and even PayPal grew 30%.
  - tomasien 13y ago
    I believe PG indicated they're growing 10% month over month recently, maybe more. I didn't find that exact Tweet, but relevant - https://twitter.com/paulg/status/403183731449413632/photo/1 https://twitter.com/paulg/status/403183731449413632/photo/1
  - pbreit 13y ago
    The PG chart shows them tripling in 6 months.
codegeek 13y ago
This article seems very dismissive of Stripe even though it claims to be fair to them. "But that was before 2011: When PayPal realized it was hated and named a new president in David Marcus who dramatically changed the culture " Really, is this true ? The above statement seems to claim that Paypal is not that hated anymore. Current paypal users who have been long term users, I wonder what they have to say. "The reason PayPal held its ground for so long despite its poor reputation is because it had the most consumer account data and the most name recognition." Umm, I would say No. The reason was "monopoly" and companies like Stripe have been a major reason that the monopoly has dwindled. "PayPal had become the big, ugly monster, screwing up transactions left and right with a mix of poor technology and bad customer service. Merchant accounts were frozen haphazardly, and the company often took its sweet time unfreezing them. PayPal was so widely loathed among developers, founders, and customers that even with its advantages of scale, ubiquity, and familiarity, companies were eager to try something else." Is this all really in past tense ?
- dangrossman 13y ago
  > Current paypal users who have been long term users, I wonder what they have to say. I opened my PayPal account in July of 2000 and they were my primary processor for 11 of the 13+ years since. They've never given me a reason to hate them, or even dislike them. None of the "horror stories" I've read about others seemed irrational once all the facts were on the table. I never understood the integration gripes either, particularly before all the newer offerings came about (express checkout, paypal pro, etc). It was always just pasting in a payment button, defining a notification URL, and an IPN script comprised of 20 lines of code in any language -- it's just POSTing back the same POST you received.
  - jarrett 13y ago
    I tried them in the early 2010s. My biggest gripes: * Hard-to-find, outdated, labyrinthine documentation. * Confusing web front end. * Flakey login. I had trouble accessing my account more than I should have. * Flakey POSTing back to my server. Notifications came through late or not at all. All of that together was a deal killer for me. Granted, a few years have passed. So perhaps these issues have been corrected. But it would be hard to persuade me to use PayPal again.
pc 13y ago
Stripe cofounder here. Needless to say, this article contains many factual inaccuracies. More broadly, articles like this are part of why we didn't announce our previous financings. If you don't also announce metrics, it's easy to write articles like this.
- tomasien 13y ago
  Did they bother to check PG's Twitter account? I mean, do they think he's lying?
  - TheMakeA 13y ago
    https://twitter.com/paulg/status/403183731449413632/photo/1 https://twitter.com/paulg/status/403183731449413632/photo/1
    - dangrossman 13y ago
      That graph certainly makes the premise of the article seem entirely incorrect.
      - rgbrenner 13y ago
        That graph contains no numbers and therefore does not have enough information to refute (or even disagree) the article
      - joshuaknox 13y ago
        That graph doesn't have labelled axes, so it's pretty hard to glean much of anything from it accurately. Assuming blue is Nov 2012-Nov 2013, that means that the starting point for 6 months ago is roughly 2/3 of the way across the blue. Eyeballing it, the height roughly doubles during that period, which would be consistent with the article. Disclosure: I work for Braintree.
        pbreit 13y ago
        If blue is 12 months then 6 months would be 1/2 across and it looks more like tripling (and accelerating, rapidly).
felix 13y ago
“It’s literally inconceivable that someone starting a company would choose to use Braintree or PayPal,” Rabois says. “Stripe has become the monopoly for new startups.” You keep using that word. I do not think it means what you think it means. Really. Braintree and Venmo are services that he could not even conceive of a startup using? I suspect that they might have like.. um.. facts that might dispute that worldview.
- jmngomes 13y ago
  I didn't get it either. I'm actually considering Braintree for accepting payments because their price is lower.
dangrossman 13y ago
Bit of a tangent: my first "traditional" merchant account provider processed 6 times PayPal's volume last year ($1.2 trillion), and charges as little as 0.09%+$0.30 for debit cards versus the 2.9%+$0.30 flat rate all these 3rd party processors start at. Why do so many startups write off going straight to an ISO/MSP? Or do they, but Stripe/Braintree make better offers? They don't all have BS fees, and flat markups over interchange are becoming the norm for pricing. Popular payment gateways like Authorize.net have drop-in libraries for just about any language or shopping cart you can imagine.
- rebelidealist 13y ago
  How much do they charge you for credit cards? Do they add a % for AMEX, Discover + "unqualified" transactions? What about monthly fees?
  - dangrossman 13y ago
    The same as debit: interchange plus 0.04%+$0.10. Even though I sell mostly B2B, Visa debit cards make up over 25% of my transactions, all at 0.05% interchange. Interchange on CNP credit ranges from 1.6% to 2.8%, but most cards are closer to the low end. There are no extra fees for Amex/Discover, and "unqualified transactions" (which is nothing but commercial purchasing cards sent to the gateway without line-item info) are <5% of volume over the past 12 months. The MAP charges $15/mo in fixed monthly fees, which includes paying for a 3rd-party for PCIDSS compliance (the SAQ and quarterly scans). The payment gateway costs an extra $20/month I think. Regardless, the savings on transaction fees pays for them immediately.
    - rebelidealist 13y ago
      Mind if I ask what is your recent total rate for Credit Cards (interchange plus 0.04%+$0.10.)? You must being doing a ton of volume to get this rate.
      - dangrossman 13y ago
dkrich 13y ago
Stripe is a transaction-based business with a clear model — and one not growing particularly rapidly if it took two years to get to just $1.5 billion in annual payments volume our sources report as of six months ago. Another way to interpret this story is that in just two years, they grew to process $1.5 billion. Braintree is processing $12 billion after having been around for an additional four years. I didn't see any analysis of the components of that $12 billion, either. What if Uber comprises 30% of their volume? Then perhaps they aren't as valuable as it seems. After all, if Uber decides to switch processors, then Braintree is fucked. It seems having a wider base of customers is usually advantageous and less risky when compared to relying on a few whales.
stevenj 13y ago
This article is awful. One of its inaccuracies: >Young founders in their early 20s take on the online payments sector with nothing more than a YC pedigree to their name. Patrick actually co-founded Auctomatic in the beginning of 2007. It sold about a year later for $5 million. http://www.crunchbase.com/company/auctomatic http://www.crunchbase.com/company/auctomatic http://techcrunch.com/2008/03/26/communicate-acquires-y-combinator-startup-auctomatic-unveils-new-business-strategy/ http://techcrunch.com/2008/03/26/communicate-acquires-y-comb...

59 points by dzhao 13y ago

I don't care if they win or not as long as they are sustainable and stay awesome. I'll use them for my stuff and my business and others can use whatever they want. I literally wouldn't use PayPal if they paid me to use them (in fact I would pay for and setup a merchant account with online payments processing long before I would touch PayPal).

sama 13y ago

Three things: 1) There are almost certainly a lot of inaccuracies in here. I saw a few on a quick skim of the article. 2) Exponential growth is a hard thing for most people to wrap their minds around. The best tech investors--many of which invested in this round--understand it. Most bloggers do not. The former camp has a better track record on valuing companies like these, although of course a lot of investments don't work out. But I would much prefer to give money to the investors in this round to invest for me than the writers of this article. 3) It's easier to spew hate than it is to build value. While bloggers write stuff like this, companies can just ignore it and laugh about it over drinks in a few years.

untog 13y ago
There are almost certainly a lot of inaccuracies in here. I saw a few on a quick skim of the article. Like what? It's easier to spew hate than it is to build value. It's also important to provide a viewpoint that isn't just blindly parroting what a party tells you. This is hardly 'hate'.
- sama 13y ago
  For example, the liquidation preference is a standard 1x, not 2x, which is a very important inaccuracy.
  - pbreit 13y ago
    It says the 2x preference is "incredibly favorable" not "standard".
    - aptwebapps 13y ago
      I believe sama is challenging the number and not the characterization.
danso 13y ago
Could you elaborate on the inaccuracies you found? Because your current comment contains not much more than an egregious and bald appeal to authority
mcarney7 13y ago
Sama, you may have missed it in your "quick skim" but Stripe isn't actually growing that fast (~50% / yr). Braintree is growing much faster and even stodgy old paypal isn't too far behind in terms of growth rate. For its size and valuation, the growth story is fairly underwhelming. As for the trackrecord and judgement of the investors, no argument that they are among the best. But only Khosla is new money, meaning they are the only one that took significant new risk (although they got plenty of downside protection via liquidation preferences, as we explained). Sequoia and Founders Fund were already heavily invested in Stripe, thus making it a much easier decision to "re-up" in this new round and pad the company's war chest for the highly-competitive slugfest ahead. I/we don't hate Stripe. In fact, I think they're a great company. I just think the narrative around this funding round when it was announced on Wednesday glossed over the legitimate challenges that the company faces.
- sama 13y ago
  Per my earlier comment, the liquidation preference thing is just completely inaccurate. And the ~50% growth rate comment is just so insanely inaccurate I'm not even sure how to respond. (do have a look at this, though: https://twitter.com/paulg/status/403183731449413632 https://twitter.com/paulg/status/403183731449413632) I/we don't hate Pando. I just think the narrative around this article when it was posted this morning glossed over the legitimate facts the company faces.
  - mcarney7 13y ago
    As I wrote to Patrick above, they've been fundraising and having M&A talks over the last 6+ mo, meaning their numbers are "out there." The figures we reported may be outdated, something that we acknowledged, but I find it extremely difficult to believe that they're wildly inaccurate for the timeframe.
mcphilip 13y ago
Basically your comment boils down to "I skimmed the article and it seemed hateful and inaccurate". And then something strange about spotting exponential growth being left to the big boys. On the contrary, I read the entire article and found it useful. The author admits that getting accurate numbers on Stripe isn't possible at this point. I wish Stripe all the best, but it still has a tough road ahead.
- pg 13y ago
  Sam knows Stripe's numbers. So the fact that he was able to see inaccuracies immediately is more meaningful than the fact that you read the entire article and found it useful.
  - mcphilip 13y ago
    I clicked on his profile before replying just to make sure I wasn't countering someone in the know. I made the wrong assumption.

tomasien 13y ago

Given that Stripe is about to process payments for Twitter, I wouldn't be tremendously worried. As a side note - Braintree was around before Stripe. Remember that. It's not Apples to Apples on their size, it's about growth, and as PG has publicly shared several times, Stripe is growing at a ridiculous rate. https://twitter.com/paulg/status/403183731449413632/photo/1 https://twitter.com/paulg/status/403183731449413632/photo/1

mcarney7 13y ago
Agreed that Braintree had a head start and that's not to be overlooked. Also, landing Twitter would be a big coup, and potentially lucrative depending on what kind of commerce they enable. But I'd dispute the claim that they're growing at a ridiculous rate. Everything we've heard puts it close to 50%/yr, which is not great given their size and valuation. Braintree was above 100% last year, Square grew 200%, and even PayPal grew 30%.
- tomasien 13y ago
  I believe PG indicated they're growing 10% month over month recently, maybe more. I didn't find that exact Tweet, but relevant - https://twitter.com/paulg/status/403183731449413632/photo/1 https://twitter.com/paulg/status/403183731449413632/photo/1
- pbreit 13y ago
  The PG chart shows them tripling in 6 months.

codegeek 13y ago

This article seems very dismissive of Stripe even though it claims to be fair to them. "But that was before 2011: When PayPal realized it was hated and named a new president in David Marcus who dramatically changed the culture " Really, is this true ? The above statement seems to claim that Paypal is not that hated anymore. Current paypal users who have been long term users, I wonder what they have to say. "The reason PayPal held its ground for so long despite its poor reputation is because it had the most consumer account data and the most name recognition." Umm, I would say No. The reason was "monopoly" and companies like Stripe have been a major reason that the monopoly has dwindled. "PayPal had become the big, ugly monster, screwing up transactions left and right with a mix of poor technology and bad customer service. Merchant accounts were frozen haphazardly, and the company often took its sweet time unfreezing them. PayPal was so widely loathed among developers, founders, and customers that even with its advantages of scale, ubiquity, and familiarity, companies were eager to try something else." Is this all really in past tense ?

dangrossman 13y ago
> Current paypal users who have been long term users, I wonder what they have to say. I opened my PayPal account in July of 2000 and they were my primary processor for 11 of the 13+ years since. They've never given me a reason to hate them, or even dislike them. None of the "horror stories" I've read about others seemed irrational once all the facts were on the table. I never understood the integration gripes either, particularly before all the newer offerings came about (express checkout, paypal pro, etc). It was always just pasting in a payment button, defining a notification URL, and an IPN script comprised of 20 lines of code in any language -- it's just POSTing back the same POST you received.
- jarrett 13y ago
  I tried them in the early 2010s. My biggest gripes: * Hard-to-find, outdated, labyrinthine documentation. * Confusing web front end. * Flakey login. I had trouble accessing my account more than I should have. * Flakey POSTing back to my server. Notifications came through late or not at all. All of that together was a deal killer for me. Granted, a few years have passed. So perhaps these issues have been corrected. But it would be hard to persuade me to use PayPal again.

pc 13y ago

Stripe cofounder here. Needless to say, this article contains many factual inaccuracies. More broadly, articles like this are part of why we didn't announce our previous financings. If you don't also announce metrics, it's easy to write articles like this.

tomasien 13y ago
Did they bother to check PG's Twitter account? I mean, do they think he's lying?
- TheMakeA 13y ago
  https://twitter.com/paulg/status/403183731449413632/photo/1 https://twitter.com/paulg/status/403183731449413632/photo/1
  - dangrossman 13y ago
    That graph certainly makes the premise of the article seem entirely incorrect.
    - rgbrenner 13y ago
      That graph contains no numbers and therefore does not have enough information to refute (or even disagree) the article
    - joshuaknox 13y ago
      That graph doesn't have labelled axes, so it's pretty hard to glean much of anything from it accurately. Assuming blue is Nov 2012-Nov 2013, that means that the starting point for 6 months ago is roughly 2/3 of the way across the blue. Eyeballing it, the height roughly doubles during that period, which would be consistent with the article. Disclosure: I work for Braintree.
      - pbreit 13y ago
        If blue is 12 months then 6 months would be 1/2 across and it looks more like tripling (and accelerating, rapidly).

felix 13y ago

“It’s literally inconceivable that someone starting a company would choose to use Braintree or PayPal,” Rabois says. “Stripe has become the monopoly for new startups.” You keep using that word. I do not think it means what you think it means. Really. Braintree and Venmo are services that he could not even conceive of a startup using? I suspect that they might have like.. um.. facts that might dispute that worldview.

jmngomes 13y ago
I didn't get it either. I'm actually considering Braintree for accepting payments because their price is lower.

dangrossman 13y ago

Bit of a tangent: my first "traditional" merchant account provider processed 6 times PayPal's volume last year ($1.2 trillion), and charges as little as 0.09%+$0.30 for debit cards versus the 2.9%+$0.30 flat rate all these 3rd party processors start at. Why do so many startups write off going straight to an ISO/MSP? Or do they, but Stripe/Braintree make better offers? They don't all have BS fees, and flat markups over interchange are becoming the norm for pricing. Popular payment gateways like Authorize.net have drop-in libraries for just about any language or shopping cart you can imagine.

rebelidealist 13y ago
How much do they charge you for credit cards? Do they add a % for AMEX, Discover + "unqualified" transactions? What about monthly fees?
- dangrossman 13y ago
  The same as debit: interchange plus 0.04%+$0.10. Even though I sell mostly B2B, Visa debit cards make up over 25% of my transactions, all at 0.05% interchange. Interchange on CNP credit ranges from 1.6% to 2.8%, but most cards are closer to the low end. There are no extra fees for Amex/Discover, and "unqualified transactions" (which is nothing but commercial purchasing cards sent to the gateway without line-item info) are <5% of volume over the past 12 months. The MAP charges $15/mo in fixed monthly fees, which includes paying for a 3rd-party for PCIDSS compliance (the SAQ and quarterly scans). The payment gateway costs an extra $20/month I think. Regardless, the savings on transaction fees pays for them immediately.
  - rebelidealist 13y ago
    Mind if I ask what is your recent total rate for Credit Cards (interchange plus 0.04%+$0.10.)? You must being doing a ton of volume to get this rate.
    - dangrossman 13y ago

dkrich 13y ago

Stripe is a transaction-based business with a clear model — and one not growing particularly rapidly if it took two years to get to just $1.5 billion in annual payments volume our sources report as of six months ago. Another way to interpret this story is that in just two years, they grew to process $1.5 billion. Braintree is processing $12 billion after having been around for an additional four years. I didn't see any analysis of the components of that $12 billion, either. What if Uber comprises 30% of their volume? Then perhaps they aren't as valuable as it seems. After all, if Uber decides to switch processors, then Braintree is fucked. It seems having a wider base of customers is usually advantageous and less risky when compared to relying on a few whales.

stevenj 13y ago

This article is awful. One of its inaccuracies: >Young founders in their early 20s take on the online payments sector with nothing more than a YC pedigree to their name. Patrick actually co-founded Auctomatic in the beginning of 2007. It sold about a year later for $5 million. http://www.crunchbase.com/company/auctomatic http://www.crunchbase.com/company/auctomatic http://techcrunch.com/2008/03/26/communicate-acquires-y-combinator-startup-auctomatic-unveils-new-business-strategy/ http://techcrunch.com/2008/03/26/communicate-acquires-y-comb...