Update: PayPal takes issue with the story's headline saying "only PayPal can be described as the 'PayPal of the mobile era.'" Read their perspective in the "comments" section.
THE FIRST SIGNAL YOU PICK UP that John and Patrick Collison, who cofounded mobile payment phenomenon Stripe, are not big on the trappings of corporate status is a North Face backpack. Unremarkable--gray with orange tabs--it goes unnoticed by visitors as it slumps against the leg of a table a few feet from the door to Stripe's San Francisco offices. Stripes, as employees call themselves, know that the backpack means President John Collison is in the house. He doesn't have an office or even a desk, so he often works at a shared table on the ground floor--when it's available. His older brother Patrick, who is CEO, has digs that are only slightly more conventional: a small desk crammed between a wall and the desk used by the admin he shares with his brother. "It would be nice to have a place to put stuff," John says. But any desk would end up piled with it, he adds. "So it's probably for the best."
The lack of a corner office hasn't stopped the Collisons, Irish immigrants and twentysomething college dropouts, from building one of the most admired and emulated startups of the current boom and an emerging power player in the buttoned-down financial services industry. Five years after its birth and two years after the brothers blast ed their way onto the FORBES 30 Under 30 list, Stripe is making quick strides toward the brothers' goal of revolutionizing digital payments. Over the past year it has doubled in size to 380 employees and snatched investments that value it at $5 billion, up from $3.5 billion a year earlier. (Recently public Square is worth $4 billion.) Once a U.S.-only service that had to beg for an audience with a bank, Stripe has expanded to 23 countries and is routinely striking partnerships with the likes of Visa , Apple Pay and Alibaba . Facebook , Twitter and Pinterest have chosen Stripe to power their e-commerce efforts, and traditional retailers like Best Buy and Saks Fifth Avenue picked Stripe for their forays into mobile. Slack recently turned over its payments to Stripe after ditching a rival product.
Stripe is private and won't disclose revenue. While most of its hundreds of thousands of paying customers are relatively small, a handful of its best-known clients--Lyft, Shopify, Kickstarter, Postmates and Wish--process tens of billions in payments combined, much of it through Stripe. Industry sources put Stripe's payment volume at about $20 billion a year. For every transaction it processes, Stripe in the U.S. gets a swipe fee of 2.9% plus 30 cents, roughly the same as other payment firms such as Square, though large customers get volume discounts. That would peg Stripe's revenue at more than $450 million. The company says that 27% of Americans will have bought something through Stripe in the past year, a big bump from just 3.8% two years ago. Still, the Collisons remain cautious. "Heartening as the success to date has been, we are so early in accomplishing the goals that we set out for ourselves," says Patrick. "If anyone here believes that Stripe has already made it, that would be hugely problematic for us."
Stripe's success at making digital payments easy to process is only a step toward its larger ambition: becoming the edifice upon which new forms of commerce are created. Think Amazon Web Services (which supports all kinds of Internet businesses) but focused on financial transactions. Stripe's technology already powers subscription services like Slack, marketplaces like Lyft and crowdfunding sites like Kickstarter. This year it made a big push into what some analysts predict could be the next big trend in mobile commerce: "buy" buttons that allow retailers to sell directly to consumers on other apps such as Facebook, Pinterest and Twitter.
The company faces formidable rivals. Braintree, which is owned by PayPal , has said it will process some $50 billion in 2015 --more than double Stripe's volume--and boasts of marquee customers such as Uber and Airbnb. (A large portion of Braintree's volume comes from "gateway" transactions that generally carry lower fees.) Adyen, a fast-growing European startup, is also larger and pushing aggressively into new markets. Yet with only about 2% of global commerce happening online, by Stripe's estimates, the Collisons--and their investors, which include Sequoia Capital and Andreessen Horowitz--believe the opportunity is immense enough for all. The biggest enemy would be the company's own missteps. "There is a higher degree of operational excellence and rigor demanded of Stripe than of most companies," says Patrick. (Translation: When you're dealing with other people's money, you can't afford to screw up.) Stripe has figured out how to organize itself and operate in an inherently complex business, he adds. "Now we have to relearn to do that at double the size." Next year's challenge? Double again and repeat.
THE COMBINATION OF SUCCESS, HUMILITY AND THOUGHTFULNESS is typical of the Collisons and a big reason that so many are so bullish on Stripe. Stripe board member Mike Moritz of Sequoia Capital has called the Collisons some of the "sharpest" people he has ever backed, high praise from a guy who has bankrolled the likes of PayPal, Yahoo and Google .
The brothers split responsibility over products, but John, 25, handles partnerships and sales while Patrick, 27, focuses on engineering and being the public face of the company. "[Patrick is] the LeBron James of entrepreneurs," says David Lee, who backed hundreds of entrepreneurs when he ran SV Angel, one of tech's most prolific investment funds. "He's brilliant, he's charismatic, he's a good leader, he's thoughtful and poised. It's very rare to see all that in one person."
The brothers learned programming at an early age and sold their first company, Auctomatic, for $5 million while still in their teens. Patrick, who briefly attended MIT, is a voracious reader who keeps a list of the 600 or so books on his shelves, on topics ranging from physics to feminism, programming, literary criticism and economics. (In a text message he admits to having finished "only" between 30% and 40% of them.) John, who dropped out of Harvard, is quieter but no less articulate or multidimensional.
Stripe was not born with the ambition of becoming a real company. The Collisons simply wanted to solve a problem they had encountered as app developers: While the Internet and mobile phones had made it simple to build services with global reach, getting paid for them remained wickedly complicated. So the Collisons built a system that enabled developers to accept payments in just a few minutes. After the service launched in 2011, it caught on quickly with other apps and soon larger companies.
In the early days Patrick and John did everything: They wrote code, handled customer service tickets and courted customers. But soon enough they realized they had to widen their focus to steering the overall organization. "That is a necessary condition for a company not to plateau and outgrow its own capabilities," says John. They spent months agonizing over their first ten hires, knowing those would in turn attract the next wave of employees. They reserved 10% of Stripe's equity for this first cadre--an unusually large amount--and worked alongside many of them for a week or more before giving them the nod. In the end all the candidates they picked happened to be former company founders themselves.
Today Stripe is much more professionalized but brings the same reasoned approach to recruiting. Anyone who interviews a candidate, for example, has a shot at vetoing him or her. And when the founders identify a top pick, they'll do whatever it takes to lure that person. Patrick says he spent close to 50 hours courting Claire Hughes Johnson, a veteran of several executive roles at Google, where she most recently ran the company's high-profile self-driving-car project before she agreed to join Stripe, where she is chief operating officer.
The early focus on company building has paid off. Stripe has managed to avoid product blow-ups and personnel misfires even while the company has been doubling in size each year. Talent is flocking to Stripe for its growth but also in large part because people want to work with the Collisons. "They're right at the top of the pecking order in the Valley," says Aaron Levie, the CEO of Box , who has mentored both Patrick and John. The sales organization grew from a couple of people to 20 in the last two years. To avoid ceding overseas territory to Adyen and others, Stripe has brought on 70 people to work with overseas banks, regulators and customers, up from a team of 5 two years ago.
STRIPE HAS GROWN ALONGSIDE SOME of its most successful customers by staying agile. When Lyft decided in early 2015 that it wanted a way to pay its drivers more quickly, it turned to Stripe. In December Lyft launched Express Pay, an option that allows it to pay drivers almost instantly for their rides rather than making them wait several days. The feature required Stripe to bypass the typical electronic payment network, called ACH, and instead build a service that connected with drivers' bank accounts through their debit cards. "This is enormous for our drivers," says Tali Rapaport, vice president of product at Lyft. "It's a phenomenal advantage."
Similarly, Twitter turned to Stripe for its first foray into e-commerce. Twitter wanted to make it easy for thousands of retailers, big and small, to sell goods through a buy button on its app. The challenge was enormously complex, in part because merchants use dozens of different technology platforms to power their stores. "One of Twitter's core values, which we share with Stripe, is 'simplify,' " says Nathan Hubbard, VP of commerce at Twitter. "They took the spaghetti web that is payments and simplified it for developers and publishers so we didn't have to worry about it."
The work with Twitter also formed the basis for Relay, a Stripe product that has allowed other merchants to sell through third-party apps easily. Stripe's ability to simplify complexity is also what sold Stewart Butterfield, the CEO of corporate messaging powerhouse Slack. This year Slack ditched Braintree in favor of Stripe because of its ability to handle different currencies and payment types and to integrate with the company's accounting software. "There are so many crazy things about how hard it is to move money around," Butterfield says. "Stripe made it much easier."
Stripe employees sometimes refer to their overall mission as helping to expand the "GDP of the Internet." Of course, that will increase with or without Stripe. For the Collisons to play a central role, they will have to push Stripe beyond the startup crowd and into the mainstream of global commerce. And they will have to continue developing products like Relay that facilitate new types of commerce, whatever form they take. Beepi is a fast-growing Stripe customer that sells used cars online and through its mobile app and delivers them to customers' homes with a bow on the hood. (Beepi, whose cars are among the highest-ticket items sold on Stripe, will soon process dozens of millions of dollars via the system every quarter, according to CEO Ale Resnik.) "Two or three years ago if you brainstormed how commerce would evolve, cars arriving with bows on them is not what you would have conceived," Patrick says. "But once it happens, it is kind of obvious."
Whatever obvious commerce model emerges next, the Collisons will likely be there to power it. There is no talk about an IPO right now. Stripes are focusing on the basics. "There is really an issue in Silicon Valley with companies getting a bit ahead of themselves in terms of their own self-perception of their own success," Patrick says. The best sign that the Collisons are up to the task is their own recognition of how difficult the road ahead will be.