We all enjoy shopping and making payments online. Even when offline, the bills can be paid with a single swipe. We don’t have to worry about carrying cash with us everywhere. It’s fun, right?
But would it be fun if businesses charged fees for accepting card payments? This is the issue that Patrick and John Collinson, brothers from rural Ireland, saved us from. They simplified the payments gateway for businesses so much that almost all businesses now accept online payments.
When the e-commerce sector first started to take off, businesses that wanted to open up shop had to visit a bank, a payment processor, and “gateways” that handled connections between the two. This took weeks, a large number of people, and fee after fee.
In 2010, Patrick and John Collinson started to debug this process. Their company, Stripe Inc., created software that companies could integrate into websites and mobile applications to instantly link with the credit card and banking systems and accept payments.
The product proved popular among Silicon Valley startups. Stripe has become the financial backbone of businesses such as Facebook, Lyft, DoorDash, and thousands more that aspire to be like them.
The business now manages internet transactions worth tens of billions of dollars each year, earning revenue by adding a small fee to each one. In the last year, half of Americans who made online purchases did so—probably unknowingly—via Stripe.
As a result, it is now valued at $9.2 billion, which is significantly more than its closest rivals’ valuations. Patrick, 28, and John, 26, are now two of the world’s youngest billionaires. Here’s how John and Patrick Collinson went about it.
Patrick and John were raised in a small Irish village of Dromineer by a family of scientists. Their father was an electronic engineer, and their mother was a microbiologist.
They were the kind of family that spent €100 per month on a satellite broadband connection through Germany to stay up to date on news and programs from across Europe. They also frequently discussed the newest advances in science and technology at their dinner table.
The boys’ school, which had fewer than 20 students in each class, was 40 minutes drive away. The two brothers didn’t enjoy school much, but that didn’t stop them from succeeding.
Patrick enrolled in his first computer course at the University of Limerick when he was eight years old and began learning computer programming when he was ten. At the age of sixteen, he won the 41st Young Scientist and Technology Exhibition for developing the Lisp programming language.
Patrick dropped out of high school in 2007 to attend MIT. He enrolled based on an SAT he took when he was only 13 years old!
At the time, his younger brother, John Collinson, was only 15 years old and on his way to accomplishing great things as well. He passed the Irish Leaving Certificate exam with 8 A1 and 2 A2 grades. In September 2009, he began classes at Harvard University. John is a pilot as well as a pianist.
Patrick began working at a company called ‘Shuppa’ with some assistance from John during his first four months as a freshman. Shuppa never made it on its own and was quickly merged with Auctomatic, a company that builds eBay tools and was officially founded by Patrick.
Before Live Current Media acquired it for $5M, this Y Combinator-funded startup operated for 10 months. By 2008, John had emerged as Ireland’s top high school student, earning the highest score on his Irish Leaving Certificate, and Patrick had been promoted to the position of Director of Product Engineering at Auctomatic.
The two brothers started working on the Stripe project at the start of 2010. Their own experience served as the basis for developing an easy-to-use online payment platform. Patrick was working multiple side jobs at the time, so he was surprised by the challenges he encountered when trying to get paid online.
When he discussed this issue with John, who perceived it as more of a challenge than a problem, the concept for Stripe was born! Max Levchin, Peter Thiel, and Elon Musk built PayPal before them, and eBay later acquired it.
Although it wasn’t a perfect solution, PayPal was a significant step in the evolution of online payments. The system was overly complicated and restrictive. After a certain level of turnover, you are placed on a rolling reserve that can last up to two months.
People were therefore forced to choose between that and the banks, which are generally despised for their expensive intermediation. Since the company’s primary goal was to create payments API for developers, the name “/dev/payments” was originally considered for the startup.
However, because Delaware law (where they were at the time) prohibited leading slashes in corporate names, they renamed it SLASHDEVSLASHFINANCE. It turned out that the name was too similar to Amazon’s DevPay and seemed pretty absurd to anyone outside of their own little world. Thus, they had to give up this name too.
They started by coming up with a list of arbitrary nouns and matching them with a .com sequel. Stripe.com was eventually purchased with the assistance of their email list friends.
Y Combinator provided its first seeding round in 2010, followed by another in 2011. It’s unclear how much they got in 2010, but in 2011 they were given $2M as start-up money.
It’s interesting to note that Stripe skipped the typical startup Bootcamp process, in contrast to 99% of YC companies. Patrick had already gone through it and didn’t see the point in going through it again.
The following summer, they meet Peter Thiel after he appeared at a YC dinner, and the founder of PayPal shared his insights into the Payments market as well as his PayPal learnings. He made the offer to invest after their meeting.
In addition to Michael Moritz, Sequoia Capital, Andreessen Horowitz, and SV Angel, they added $2MM in funding.
Here, the revenue model is very straightforward. It makes money by charging fees to its customers. The fees are always determined by the amount of the payments. Since the beginning, the revenue model has remained the same.
The company offers various packages for the products that have been chosen, and it levies a 2.9 or 0.30% fee for each transaction. Every successful transaction made through their website is subject to a set fee, which is applied here.
The company adds 1% to its standard fee for international transactions, making the total fee 3.9%. When questioned about the fees, Stripe responds that you d up paying a lot more than you think when you add up the monthly fees, setup fees, gateway fees, PCI fees, international credit card fees, and other charges.
For instance, other providers will charge you for the unsuccessful attempt if you try to process a card but fail.
Stripe’s initial public offering (IPO) is one of the most anticipated in the technology industry. The company took the first steps toward going public in 2021. Stripe is on track to be one of the largest IPOs in history, with a projected valuation of $74 billion.
The company’s mission is to boost the internet’s GDP. The company is expanding as a result of the relationships it has formed with its customers. The company made $1 billion in revenue during the pandemic. Three months later, revenue had risen to $9 billion.
Stripe is currently one of the most intriguing companies in the world. The company began with a simplistic idea to improve e-commerce payments, and it has since developed into a huge, multi-billion-dollar enterprise.
Stripe still has a bright future ahead of it, as evidenced by a large amount of investor interest the company has received. So, what made Stripe so unique?
Before Stripe, there were other online payment options, but John and Patrick simplified the payment process for businesses. They ran into a problem, but instead of complaining about it, they saw it as a challenge and came up with a solution.
What was once a simple fix for tricky payments has grown into one of the most valuable startups. This proves that chasing money does not result in a good startup; instead, focus on making things better for yourself or others, and you may get an idea of the best startup.
— Learning Even if you believe you are the smartest, some education might still be beneficial. Patrick Collinson was a genius since he was a child. Even so, he attended YC Bootcamp, met senior entrepreneurs, and learned from them.
On the other hand, even though John, after Shappa, became wealthy, he still went to Harvard to learn more. Both brothers are avid readers too. So, educate yourself as much as you can and never stop learning.
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