Payments Startup Stripe Joins the Billion Dollar Club; New $80 Million Funding Round Will Help Company Battle PayPal

January 24, 2014 Leave a comment

Payments Startup Stripe Joins the Billion Dollar Club
New $80 Million Funding Round Will Help Company Battle PayPal
DOUGLAS MACMILLAN
Jan. 22, 2014 7:45 p.m. ET
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In the crowded field of online payments, venture capitalists are betting Stripe Inc. is a standout worth more than a billion dollars.
The payments startup has raised about $80 million in new funding this week from venture-capital investors including Khosla Ventures, Sequoia Capital, and Founders Fund, said brothers John and Patrick Collison, the company’s co-founders, in an interview. Stripe, at just over four years old, is now valued at $1.75 billion.
The lofty valuation for such a young company suggests Stripe is growing rapidly in the area of mobile payments—a market that Forrester Research estimates will add up to $90 billion in total U.S. spending in 2017—and posing a threat to eBay Inc. EBAY +0.48% ‘s PayPal, the digital-payments leader for more than a decade.
The San Francisco startup is among several companies trying to simplify how businesses accept payments online and through a mobile device. Stripe provides easy-to-use computer code that any merchant can plug into their website or mobile app to begin accepting credit-card payments. The company takes 2.9% of most transactions in addition to a flat commission of 30 cents per charge—the exact same rate set by PayPal.
“Payments are still startlingly disconnected and fragmented,” said Stripe President John Collison. “Less than 5% of consumer spending happens online today. It’s pretty clearly going to be much larger than that.”
The new funds will help fuel Stripe’s international expansion. Stripe, now accepted in just 12 countries, has plenty of work ahead to catch up to PayPal, which is in more than 190 countries. Entering each new country requires meeting local laws governing payment providers, and sometimes requires Stripe to team up with existing businesses, Mr. Collison said.
While the company doesn’t disclose its revenue or number of merchants, its software is now used in thousands of popular mobile apps, including ride-sharing service Lyft and grocery delivery app Instacart. Its total payment volume has doubled since last September, he said.
Stripe’s transaction total is likely dwarfed by PayPal, which processed $125 billion in purchases last year. But according to Khosla Ventures’ Keith Rabois, an early PayPal executive, Stripe has a competitive advantage because it created a simple new service that is popular with developers.
“PayPal has a lot of legacy technologies cobbled together, whereas Stripe has reinvented everything they are doing from scratch,” Mr. Rabois said. “Stripe has created a brand where all new developers start with the premise that Stripe is the right answer. If you were a developer today and you thought about using a different option, your engineers would think you’re insane.”
Stripe saved costs for Lyft, which began using the service a year ago to let drivers quickly process mobile payments. “Stripe removed the need for us to hire additional internal staff to process payouts to Lyft drivers,” said Lyft co-founder Logan Green in an email.
For its part, PayPal stepped up competition in mobile payments last year, when it paid $800 million for Braintree, widely seen as Stripe’s closest rival. On Wednesday, eBay said that activist investor Carl Icahn wants to split up the company, dividing its PayPal payments unit from its e-commerce site.
A spokesman for PayPal declined to comment.
Stripe has now raised more than $120 million from investors, who include PayPal alumsElon Musk
and Peter Thiel as well as Andreessen Horowitz, Redpoint Ventures and General Catalyst Partners. Stripe was last valued at close to $500 million when it raised funding in July 2012.
An engineer-heavy workforce, Stripe now has about 90 employees.
The company is in talks to power payments for a shopping feature on Twitter Inc.TWTR -0.14% ‘s social network, according to a person familiar with the discussions.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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