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

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.”

Updated 05.10.18, 10:10 BST: Stripe is currently valued at $20bn. It last raised funding in September 2018.

Updated 07.10.18, 11:00 BST: Susan Fowler published her blog post about sexual harassment at Uber after joining Stripe and now works at the New York Times.

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