Walk into Stripe’s head office in a refurbished luggage factory in the Mission District of San Francisco and you will find staff bicycles leaning against each other in the reception of an open-plan office that looks more like a hipster lounge of a trendy Manhattan hotel.
Staff work on laptops sitting on sofas or armchairs or at hot desks, while a large number of employees are huddled in the “Manatee” glass-walled conference room. Two other conference rooms are also named after water mammals.
This is the most unlikely place to find the two young businessman representing Ireland at the EY World Entrepreneur of the Year next week in Monaco.
Patrick and John Collison, the boy wonders of the financial technology or "fintech" sector, are just five years into their new company, and Stripe, their online payments firm, is still the red-hot start-up of the sector. It has been valued at $5 billion (€4.5 billion) based on a fundraising round last year that has brought outside financial support in the company to more than $300 million. Backers include PayPal founders Elon Musk and Peter Thiel.
The sums are a far cry from the $5 million the brothers made selling their online auction website, Auctomatic, in 2008 when Patrick was 19 and John was 17.
Stripe is in the big league now. It has 470 staff in offices around the world, including 30 in Dublin where it is hiring aggressively for a major global hub in Dublin’s docklands. This is not bad for two college dropouts: Patrick left Massachusetts Institute of Technology and John left Harvard to establish Stripe.
For all the globe-spanning reach and ambition of Stripe, the company remains as down-to-earth as you would expect from two laid-back twenty-something founders from Limerick. Until three months ago, John did not have a desk of his own in the offices, preferring to sit next to the reception desk where he could watch visitors come and go.
Building apps
Across 18th Street, in a building that once housed a laundry, John, the younger of the brothers, arrives in the “Jaguar” conference room – the second-floor rooms in this building are named after animals that can climb trees – ahead of his brother who is running late.
John explains how they began tinkering with an idea that would become Stripe while still at college on the east coast of the US. Frustrated by the inability to send money online as you might share a photograph on Facebook or Instagram – an obstacle they encountered building apps and web services – they decided to look for a fix.
“The first lines of code we wrote were in October 2009,” says John. “We worked on it through the semester. It started off with Stripe being this fun little side thing when we weren’t working in class and probably by the end of the year class was this fun little side thing when we weren’t working on Stripe.”
The brothers moved to Silicon Valley in 2010 after John finished his first year and Stripe has grown from there. Since then, the wunderkinds have begun to challenge established players such as JPMorgan Chase and PayPal. They have featured on the cover of Forbes magazine twice and on the flagship CBS news programme 60 Minutes. These two young Irishmen are the financial pioneers extending the frontier of the internet economy.
“In a way we were exactly who you would expect to start Stripe because we had been the target customers: we had been building online businesses and we had run into the fact that the hardest part of running an online business was not creating a product that had lots of demand. It was actually capturing that demand and building out the business side of it and being able to accept money for it,” John says.
Stripe charges a 2.9 per cent commission plus 30 cent for every transaction and everyone from British newspaper the Guardian, the NFL and Macy's in the US to Red Nose Day have used the company's services to move money from consumer to business or charity.
Presidential campaigns
Stripe claims that one in every three Americans online have used its services in the past year. John says New York-based non-profit organisation, Charity: Water has seen a 40 per cent bump in donations as a result of Stripe making the donation process easier.
The political campaigns of the three US presidential candidates Hillary Clinton, Donald Trump and Bernie Sanders are all using the company’s services to accept donations.
Stripe’s software works with Apple Pay and Android Pay as well as with Alipay in China, where many customers do not have credit cards, and with Bitcoin. Being compatible with as many forms of payment as possible is all part of Stripe’s e-commerce revolution.
“Online commerce is still only about 2 to 5 per cent of commerce, total spending. By and large we are just not on the internet when it comes to commerce and we think Stripe can play a part in changing that,” said John.
The company is betting big on online globalisation. Atlas, a new $500 product, is aimed not only at accepting money online but creating new internet marketplaces that will allow entrepreneurs and businesses to connect with customers on opposite sides of the planet.
Coterique, the fashion start-up created by Egyptian entrepreneur Dana Khater, is a good example of a business benefiting from Stripe’s reach. After the 2011 revolution, disposable income dried up and Khater had shelves full of inventory but no customers. She turned to Stripe and used Atlas to find customers and shift product.
Stripe’s transactions are based on an application programme interface (API), the technical term for a key that unlocks doors between two websites. Atlas goes further, offering entrepreneurs a US bank account, an incorporated Delaware company, a US Stripe account and access to legal and tax advice that allows entrepreneurs trade online in US dollars as US businesses. All this opens the door to a global marketplace, avoiding the cumbersome and fickle world of merchant banking and the vagaries of risk-averse bank managers.
“You had these banks acting as gatekeepers for the online economy and so our thinking is that we can grow the size of the online economy by providing better infrastructure for people to start businesses and then grow those businesses, spread them internationally,” says John.
The appeal of Atlas even led to a phone call from the White House. As part of the Obama administration’s reopening of business ties with Cuba, entrepreneurs on the communist island told US government officials of the benefits that Atlas could bring and the White House got in touch.
Patrick Collison joined executives from various US corporations in Barack Obama's entourage on his historic visit to Cuba in March, the first by a sitting US president since 1928. Stripe is one of the beneficiaries of the president's recent rule changes allowing US banks to open business banking accounts for Cuban nationals.
Fifteen minutes into the interview, Patrick bounds into the “Jaguar” conference room and talks excitedly about another potential opportunity for Stripe in another country: Turkey.
PayPal had just said it was suspending operations in the country after the local banking regulator ordered the California firm to cease payment transfers eight years after first operating there. Turkish start-ups that Patrick met in Istanbul two years ago were texting him, asking Stripe whether, with PayPal gone, they can use Atlas, given that it complies with US law.
“Never a dull day. It all sounds abstract and theoretical for us but for them it is what happens tomorrow,” says Patrick, energised by the pressing opportunity.
John grows particularly animated about another company called Instabug, one of the earliest users of Atlas, operating in another country. The firm provides the tools to allow a host of Silicon Valley users to fix bugs in their apps – from its base in Giza, Egypt.
“This product does not have a fundamentally local user. It is consumed over the internet so geography is increasingly irrelevant to who it is,” he says.
“The world still has all these notions: lots of geo-centrism. It is taking a while for everyone to get past that.”
The Collisons are in a golden age of financial technology. According to KPMG and CB Insights, $14 billion was invested in venture capital-backed “fintech” companies in 2015, double the previous year’s figure. Tens of billions more are being invested by banks themselves in exploring the opportunities offered by new technology, just as auto companies are having to embrace technology such as driverless cars.
Patrick says that increasingly banks are having to solve their problems by having to develop software.
“On the one hand, I admire them. They have seen it quite clearly: the need to become software companies,” he says.
“On the other, it is extremely difficult for any company to shift out of its DNA in flight. It would be very hard for Stripe to be a financial company.”
All this global innovation is a long way from the shores of Lough Derg where the Collisons first started programming their own software while their parents ran the Dromineer Bay Hotel. Patrick says it all started from a textbook on computer programming he bought one day in an Eason’s book shop in Limerick.
“It was all downhill from there,” he says. The first challenge was pushing their parents to invest in a Digiweb satellite broadband at home to overcome sketchy Eircom phone lines.
“For John and I, it was our first marketing campaign: trying to convince our parents to get a proper internet connection. It took several years. It taught us to be investors for the long term,” he says, drawing a laugh from his younger brother.
‘Highly unexpected’
Patrick finds the prospect of representing Ireland at the EY World Entrepreneur of the Year award “surreal” and “highly unexpected”, given that the brothers grew up watching and reading about others who won the Irish award.
“The Rose of Tralee for entrepreneurs,” says John with a laugh. Past winners include Liam Casey, founder of Cork incubation firm PCH who won EY Entrepreneur of the Year in 2007. He is an investor in Stripe.
“It is almost dangerous in a way,” says John, uneasy at being honoured at such an early stage given their ambitious plans to grow the company.
“There is a long and storied history, especially in Silicon Valley, of companies that got to a certain stage and got too comfortable, and then the next wave passed them by.”
John cites the rapid evolution in new products and services at companies such as Google and Amazon as examples of how Stripe must constantly keep moving and changing.
“Patrick and I tend to get uncomfortable: we risk resting on any laurels. I think people are blue in the face from hearing it from us but I think that’s a really useful trait for a company to have,” says John.
Where entrepreneurs encounter problems with their online businesses – whatever they might be – the Collisons want Stripe to be the go-to fix-it shop.
“We are deliberately being fairly broad in how we think about it, in that Stripe is a platform for running online businesses and we will go tackle whatever problems get in the way of creating online businesses,” he says.
John, with a boundless energy, shifts in his chair as he expounds on where Stripe needs to go. He comes across as the doer of the pair. Patrick is more cerebral, the dreamer, though both clearly share the same long-term vision for the business.
“John cares a lot about quarter-to-quarter, month-to-month, week-to-week operational discipline, and I get to think about what these metrics look like in 10 years or multiple-decade view,” says Patrick.
The brothers exude an irrepressible energy and sense of fun about their business. John pokes fun at his brother’s analogies to business theories and past innovations. At one point in our hour-long interview, John pivots to a whiteboard behind him to sketch out two umbrella sellers on a beach by way of illustrating Patrick’s explanation of Hotelling’s Law, the game theory of how rival businesses tend to cluster together on products and in location rather than diversify. You travel a mile a minute in conversation with the Collisons.
Patrick, displaying his heavy consumption of business and technology tomes, refers to the invention of the cash register to show how new financial technologies can reduce fraud and to the genesis of the grocery store and the invention of the American shopping mall to explain how Stripe has been “broadening” the marketplace to a global level.
Entrepreneurship
That world view has given the brothers insight into how Ireland can improve its own ecosystem for entrepreneurs.
The brothers do not believe that Ireland is too dependent on foreign direct investment but that the Irish corporate landscape cannot be only about this.
“It is not the only ingredient in the soup that you need for entrepreneurship,” says John. “It is an awesome asset that a bunch of other European capitals do not have and we should build on top of that but there are the other parts that are necessary as well.”
Patrick believes the push for a low-tax rate for entrepreneurs is over-rated, coming from people not involved in entrepreneurship who think low taxes are what entrepreneurs want. He suspects some dress up requests for more favourable tax treatment as support for entrepreneurs.
“John and I have made a full-time job of talking to start-ups and it is incredibly rare that anything tax rate-related comes up. Tax complexity comes up all the time but as to the total absolute rate of taxes, it is not a problem,” he says.
Patrick refers to the famous quote from Picasso about when art critics come together they talk about form and structure, while artists talk about where to buy cheap turpentine.
“When you get supporters of entrepreneurship together, they talk about vision and plans and ‘Entrepreneurship 2020 strategy’ or whatever,” he says.
“When you get founders together, they talk about how to set up a bank account, how to file your taxes and especially how to get visas.”
Patrick says Ireland can “do better” in terms of visas.
“Visas in general are the single biggest headwinds on entrepreneurship globally,” he says. “If Ireland fails to make any progress here, it is not going to hold back global entrepreneurship; it is going to hold back Ireland and so it is just hitting ourselves.”
The brothers return to Ireland regularly. John will travel to the World Entrepreneur of the Year awards on his own next week. They always like to have one Collison back at base to watch over things at the Mission, a San Francisco neighbourhood that is home to “lots of aspiring start-ups that are still trying to leave the launchpad”, says Patrick.
As for Stripe’s own mission, Patrick says it is “growing the GDP of the internet”.
“We want to grow it, we don’t just want to tap the underlying sectoral growth: we want to be causal agents instigating the growth,” he says.
CV
Names: Patrick and John Collison Ages: 27 and 25 Titles: Founders of online payment company Stripe; Patrick is chief executive and John is president.
Education: Castletroy College, Limerick, and, for a while, Massachusetts Institute of Technology (Patrick) and Harvard University (John). Something that wouldn’t surprise you: Both brothers are technology history buffs. One of Patrick’s favourite books is Computer Lib, the 1974 work by Ted Nelson. Something that would surprise you: John had a rule that he ran at least three miles every day in 2015. Their mother posts them her home-made apple cake from Limerick on their birthdays: “I had a unique appreciation for its merits,” said Patrick.
