Our favorite FinTech startup in the world - Stripe

Having spent several weeks analyzing and looking through a variety of very exciting companies in the Financial Technology space, we believe that Stripe represents the top employment opportunity in the sector today.

It's Stripe.

Having spent several weeks analyzing and looking through a variety of very exciting companies in the Financial Technology space, we believe that Stripe represents the top employment opportunity in the sector today.


Why?

We think Stripe is developing a uniquely progressive and appealing culture that results in quality and elegance in all the products it ships, and that will allow the company to claim and sustain a very strong position in the web and mobile payments market long into the future.  Valued at $1.75 Billion, four years into its existence with about 150 employees today, Stripe is punching massively above its weight, and so we think anyone who joins the team now (receiving common stock options as part of their compensation package), will be able to participate in significant equity upside.  And the founders and team seem like such a nice bunch!!!


Background

Stripe graduated from Y-Combinator in 2010 with a vision to make it dramatically easier for any web or mobile service to take a payment. Previously, it was cumbersome to integrate a payment gateway into a web service, requiring weeks of discussions, contract negotiations and product integration. John and Patrick Collison, brothers and co-founders of Stripe, had a sense that it could be made much much easier. It turns out not only were they right, but they also had the skill to build the team that could build the product that would actually do it. Today Stripe is processing an estimated $2 Billion in payments in over 130 currencies, throughout the United States, Canada, Europe, Australia and the march continues.


Financials

Since graduating Y-Combinator, Stripe has attracted a very significant warchest, $120 million, of capital, from some of the most successful venture investors in the world, including: Peter Thiel, Sequoia Capital, Andreessen Horowitz, Founders Fund and Khosla Ventures. The most recent financing of $80 million came in January 2014 and valued the company at $1.75 Billion, just 4 years into its existence. That’s some epic value creation right there. Divided by Stripe’s estimated headcount then of about 90 employees, that would make just under $1 million in capital raised per employee. That’s a lot of jelly babies, and Stripe still won’t run out of cash to pay you anytime soon. We estimate Stripe is processing approximately $2 Billion in transactions, so based on a (simplified assumption) 2% average transaction fee, will be making approximately $40 million in annual revenue. With a current headcount of about 150, assuming a fully loaded average cost of $200k per person per year (rents are really really high in San Francisco!), that would imply annual Operating Expense of around $30 million, so Stripe is probably operating cashflow positive at this point.


Risks

In the Payments industry, Stripe is still the small kid in the playground, with some serious competition, most notably Paypal and Braintree, a mobile-focused payment company founded in 2007, which Paypal acquired last year, not to mention a slew of dinosaur incumbents.

As a very product-focused company, it is unclear how strong the Business Development capability is globally or will become, and we think this is key to convincing older-school companies to adopt Stripe, and to beating the well-backed competitors.

A very good and in-depth analysis of the cautious case on Stripe is given in this article from PandoDaily, which mentions an important point that the latest fundraising was done at a greater than 2X liquidation preference. That means that investors will get the first $160 million out of any exit before remaining proceeds are distributed (we still don’t think that impacts the financial potential for employees who join any time soon).


Conclusion

Our long-term view is that Stripe is going to continue to grow and succeed. Whether it’s an outright winner or a top finalist we don’t know, but either way, making a huge positive impact on the global payments industry, and securing a multi-billion dollar exit (if it wants one), are more rather than less likely.  Grab a seat on this bus if you can.

Stripe is currently hiring for these positions in San Francisco, London, Australia and Globally:

https://stripe.com/jobs

***


Update on the Business Development concerns: Crushed!  as Stripe announces deals to power payments for Twitter, and gets included in launch of Apple Pay - awesome deal making, confirming this company is on a tear.

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