John Collison

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0:33One of the most valuable tech startups that's still private is Stripe. It was started about a decade ago by two brothers, both of whom dropped out of college to start the company. The company is reimagining the way people make their payments and had a chance to sit down with one of the founders, John Collison, in his offices in New York City. So tell me what Stripe actually is. So Stripe makes it easy for businesses to accept payments online. online. We got the idea when we actually had started our own internet business and we found that so much stuff is getting better. The tech is getting better, programming languages, cloud hosting.

1:07But when it actually comes to running a business and taking payment from people all over the world, that was something that was really challenging. And so today, if you're setting up a business online, if you decided that you wanted to start a media company and charge subscriptions,$20 a month to access all the back catalog, How do you actually go and do that and take people's credit card details or bank account details? Stripe provides the infrastructure to do that. Where did the name Stripe come from? Stripe was originally called slash dev slash payments, like with the forward slashes in there, which was kind of a wry software engineering joke.

1:46And you can imagine it just like baffled everyone. People in the financial industry thought we were some kind of dodgy fraud thing. And so, okay, it was clear this wouldn't work. So we went through, the entire company went through a renaming exercise where we tried to come up with, you know, the best names we could and find what domain names were available. You know, we considered the name Pay Demon for a while. Again, you know, we were attracted to bad names for some reason, but we settled on Stripe. Before you started the company, how did people get this service? In other words, there was business being done long before Stripe.

2:15So how did people deal with this problem? The most common way is people went to banks. You would go to Bank of America or Chase or someone like that and you would get a merchant account from them. But you can kind of imagine banks didn't really understand internet companies that well. This is much more about providing the software to plug into your website. They're not in the software business. And honestly, it was a bit of a hobby. It was a sideline from them. You won't hear when you hear a bank CEO talk about their business. This will never be front and center as something they really care about.

2:45And so there was no one who really specialized in making life easy for internet businesses. So your company was started was doing business with a lot of entrepreneurial companies, but then you started doing business with Fortune 500, Fortune 100, Fortune 50 companies. Was that a transition? You have to wear a coat and tie when you go see the CEOs of Fortune 50 companies. And how did that work? You might associate, you know, a Fortune 100 company with like the tech is a bit out of date and the user experience is a little bit clunky. If you talk to people inside those businesses, that's obviously not what they want.

3:15And so what we found is large companies coming to us because they want to offer a really compelling user experience that's as good as all the tech guys might do. And so we're talking to Ford about they obviously want to make it where you can just buy a car online. You don't have to necessarily go through the dealership. We're working with Hertz. They want to modernize the car rental experience. like why can't you have everything within the Hertz app and have that be the payment experience rather than having to wait in line at the car rental counter. You know, Amazon similarly making it easy for people all around the world to pay urban outfitters.

3:50They want to make it easy to buy something online and return in store or vice versa. And so we found all these large companies tended to almost kind of look at the startups and what they're doing and say, we want to be able to deliver that caliber of customer experience. And so I think our foundations in the tech world, in the startup world, were actually quite useful as we went to go talk to the large companies. Now, there's a phrase in the Silicon Valley world called unicorn, which means a gigantic company. It's come from nowhere. It's got a lot of value. I guess you were about the biggest unicorn out there because one time you raised money at a valuation of about 90-some billion dollars.

4:27More recently, a little bit lower than that. But$90 billion valuation, many times people would say, if companies worth$90 billion now, maybe less than that, why not take it public? You're a privately owned company. Why have you not taken it public? I get the sense that some tech companies, maybe a lot of tech companies, go public a bit too early. And what I mean by that is in Stripe's case, I mean, we still see tons of opportunity to change and grow the business quite a lot. We're still constantly inventing new products and developing new business lines. And obviously you can do that in the public markets.

5:07But I think culturally we have ended up, you know, you look at analysts following public companies and obsessing over guidance and what will be this quarter and things like that. Culturally, we've ended up, I think, in a bit more of a world where public companies are suited for the extract stage of the sigmoid curve rather than the expand stage. And Stripe is still growing very quickly, reinvesting in new products. I don't think it's actually better in terms of how you can compensate employees, where you can give a better instrument for employee compensation and attracting the top talent as a private company.

5:40Because a public company, one, it's an instrument that everyone else has access to. a public company stock. You can just buy it in the public markets if you want. There's no rarity to it. But also, you see various public companies that go through a kind of hype cycle and then spend a long period of time with flat or the valuation going down. Whereas I think as a private company, you're less likely to run into that. So you had a CFO who retired. And when she did so, you became her successor acting CFO. What was that like to be the CFO as well as the president. Yeah, well, luckily now we have a real CFO, a fellow named Stefan Tomlinson, who joined last year.

6:20But as you reference, for the best part of the year, I was our interim CFO. It's actually a very useful experience where I think all founders should be CFO of their own businesses for, you know, a period because it really lets you get a quite hands-on sense of the business. But, you That was during 2023, which was a funny time where we did this kind of large fundraise in the beginning of the year. It was a quite large private market fundraise. It was a weird time. Like, you remember the start of 2023? Everyone was nervous. Everyone was hiding under their desks. They didn't want to invest money.

6:58And so I think we had to kind of draw people out and be willing to make investments. And then that was a year where we also had to kind of tighten up a lot on kind of expenses and things like that. because everyone was battening down the hatches a bit for a recession. The recession didn't end up coming, but I think that was useful prep regardless. So you had a point at some point where you had to, say, lay off some employees. Was that difficult to do? Well, of course. I think in particular because it was the company's fault at some level where we had been trying to project forward how many people we'd need.

7:31And at some level, we'd gotten that wrong, especially as it looked like things were looking kind of quite a bit weaker for 23 and 24. So this was in 2022. But you have a whole bunch of people who are very good. And yes, just like it's not the right kind of structure for the company to have them. And so, of course, it's going to be hard. Now, sometimes the companies in Silicon Valley, they're seen as having postponed an IPO if they wait four years, five years, six years, 10 years. Waiting 14 years is a long time. Is something like an IPO ever on your horizon or is it just something you don't even think about or don't talk about?

8:04Yeah, I mean, look, presumably at some stage, but I think the kind of broad narrative gets very transaction focused because that's like the interesting media moment or something like that. If you were to look at a meeting inside of Stripe, you can probably imagine what it is. We're very focused on is the product working well for customers? How is new customer growth growing? How are kind of the fundamental financials of revenue growth and EBITDA for the business? But we don't spend a lot of time on kind of transactions and planning those sorts of things. So when you get some professional investors, and many of them are among the leading venture capital firms in the United States, like Sequoia, for example, at some point, venture capitalists say, well, this is a great product.

8:46You're doing a great job. We'll give you more money. But we would like to actually get our money back at some point. You don't get any pressure from them saying after 10 years or so, you should get the public or get our money back? I mean, all of our venture investors kind of own a stake in the company that is compounding and continue to appreciate intrinsic value. And so I think that is the business they're in. That's what they're excited about. And you have to remember, you know, someone like a Sequoia, I don't think it's an open question as to whether Sequoia is a good venture investor. I think they're not worried about having to prove themselves to LP.

9:22I think that's a known thing. So I think at the peak of the tech, I won't say bubble, but the frenzy on tech companies, your company was valued, I thought, around$95 billion or something like that. So$95 billion for a startup is pretty impressive. But then the meltdown in the tech world occurred. I think your last valuation was probably something closer to$60 billion. So is that depressing when you're from$95 to$60? $60 is still very high. And were people upset, or do you say this is just the tech world and it'll go back up? Yeah, look, people have a funny relationship to prices where, first off, in the entirety of the public market space, you had a lot of enthusiasm in 2021, especially for things like, you know, SaaS and fintech and things like that.

10:07If you look at companies in a similar space to Stripe, but that are public, be it Shopify or Square or anyone like that, they also had kind of much higher valuations in 2021. And those came down because interest rates changed, the environment changed. And so, of course, that should flow through to valuations. But we find in the private market world, people get very funny about it. And I see other companies trying to preserve a valuation that doesn't make sense anymore. Like prices are based on, you know, you're at the midpoint of supply and demand and they're kind of the imputed value of all the future cash flows.

10:42But I don't think it serves anyone to be in denial about what a price is. OK, so let's suppose somebody came to work at your company at the very beginning. They don't own as much as you do, but presumably they own some. And they're not going to be maybe as wealthy as you and your brother might be. But they might say, I'd like to sell some stock. I don't have as much reserves as other people. How do they get to sell their stock if you're not going public? Do you buy their stock back from them? Yeah, so what we've done twice now is tender offers where we match together investors and sometimes also use the kind of company's own cash that it generates and do a buyback program where people have the opportunity to sell their shares.

11:23And so we did that last year. We did that this year again. I think we'll probably do it again in the future. So let's suppose somebody's watching this and says, this is a very smart man. I've heard of Stripe. It's a great company. Valuation might be$60, $70,$80 billion, whatever the next round might be. I'd like to invest in it. How does somebody invest in Stripe other than going through the venture firms they already have? I mean, they don't. In some cases, they might have exposure because they're a shareholder in some entity that owns a stake in Stripe. And so Fidelity owns some shares in Stripe.

11:55And so maybe people have looked through exposure based on that. But remember also, we are not, the business does not do kind of primary equity raises anymore. The business generates cash. And so the only shares that trade hands are just in the secondary markets where we want to give employees liquidity. But you haven't sold your shares. I've sold shares at some point in the past, but, and you know, the tender offer or something like that, but certainly we're not. Introducing the all new Adobe Acrobat Studio, now with AI powered PDF spaces. Do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into five insights with a click?

12:34Do that with Acrobat. Need templates for a sales proposal that'll close that deal? Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time? Do that with the all-new Adobe Acrobat Studio. Learn more at adobe.com slash do that with Acrobat. The company. Now, you are the co-founder and president. Who is the other co-founder and CEO? So our CEO and my co-founder is my brother, Patrick. So we've been working together for a long time. We started the business 14 years ago, and we actually started a business together previously that was part of how we got the idea for Stripe.

13:12You've heard the phrase sibling rivalry. So do you have a sibling rivalry with your brother? Is he your older brother? He's my older brother. No, it's not. It might not work that well if we were particularly rivalrous. I actually think it's quite valuable for us. Look, everyone's co-founders' relationships are different. You have co-founders at Carlisle. In our case, in Silicon Valley broadly, co-founder relationships can be unstable inherently. Currently, you look at all of the large companies, Apple, Microsoft, Google, pick your example, and Facebook. In a lot of cases, the original co-founding team did not stick together.

13:59And again, in Stripe's case, we get really excited about this idea of growing the GDP of the Internet, expanding the Internet economy. And 14 years in, we actually, like, we now are at the table stakes part. We feel like we've done some good groundwork, but we can do some really interesting stuff over the next 10 or 20 years. I think that's much more fun, and you have much more opportunity to work on it with a long-term perspective if you have very trusting co-founder relationships. It makes it, I think, more stable, more enjoyable, so you're more likely to stick at doing it. And so I feel pretty fortunate for the relationship that Patrick has.

14:35Let's talk about your background and how this came about. So I can tell from your accent you're not from New York City. Exactly, yeah. So originally you're from where? I'm from Ireland, and I grew up there, and then I ended up coming to the United States for college. You grew up in Ireland, Limerick. I assume you did okay in school, but you got into Harvard, which is probably not that easy to do from Ireland. So why did you go to Harvard, and why did you drop out of Harvard? I went to Harvard, I don't know, at that time I just had some wanderlust. I wanted to get out and explore the world. As you say, I was pretty academic.

15:08Like, I liked school. I liked studying. And I just really wanted to get out to somewhere else. And I think that's sometimes for people who grew up somewhere kind of small in a small community, that's a common sentiment. And so that's how I ended up at Harvard. We actually started Stripe when we were in college. So I was at Harvard. Patrick was down the road at MIT. We had been talking about this idea. And again, this was 2009, where there were a huge number of internet businesses. But if you talk to any internet entrepreneur, again, they would tell you that this was their biggest frustration. But we were 19 and 21 at the time.

15:48We were not experienced in the industry. And I think what's interesting is Stripe is obviously a regulated financial services firm. It was probably helpful that we had no idea of what it would entail, because it's actually pretty complex to build something like Stripe, but we gradually got into it. All right, so you did one year at Harvard, and you dropped out. Yeah. And did you say to your parents, I'm going to be the next Bill Gates or Mark Zuckerberg, or they didn't say anything about the importance of going and getting your degree? Quite the opposite of what I said to my mom when I was leaving Ireland for college.

16:22She said, okay, because Patrick had dropped out previously, she said to me, if you're going, you're going for four years, you've got to do the whole thing. I said, yes, absolutely. I'm going for four years. I will graduate. And that was about two months before we started writing the code for Stripe. So where did you get your initial money to get the company started? So we did like a lot of people. We did a little bit of kind of friends and family fundraising from anyone we could get connected to. And then the very first investors were Paul Graham, Sam Altman, and then Peter Thiel. Okay, so they came in early.

16:54At that point, you had no revenue. You had nothing but an idea. Yeah. We had a few customers, and so I guess we had a little bit of revenue, but minimal. It wouldn't be impressive to you. All right. So you get the company off the ground. And at what point do you get some enough customers to go to a professional venture capital firm and say, we have a real business here? I think with the early stage investors, they're very much focused on the founding team, the product, things like that. And so when you look at those early, early investors to Stripe, I think basically what they looked at is they saw the product.

17:25We might have had 50 customers at the time or something. We had a quite compelling demo showing how quickly you could get started accepting payments. And this is still like, if I want to sell someone on Stripe today, I just showed them, you go to stripe.com, you log on, and you can be set up to start accepting payments from customers all around the world in a matter of five minutes. That's kind of the demo now, and it was the demo back then. And then we would encourage investors to talk to any kind of tech entrepreneurs they know and just ask them how the experience of dealing with payments was.

17:57And so, you know, we talked to an investor, we'd show them the product, whatever. And then they would maybe go call one of their portfolio companies and, you know, say, you know, hey, do you guys have any problems accepting payments? They'd have to hold the phone away from their ear. They got so much yelling at the other end about how crummy the existing providers were. But I think that's really what they were underwriting in the early investments was just, this seems like a good idea, this product seems good, and it seems like it's addressing a real problem that people have. Many companies struggle with a couple issues like ESG, DEI.

18:24Let's talk about that. Do you care about ESG at Stripe? Is that a major focus or not your major focus? There are a number of mission-oriented causes and ideas that we care about. Firstly, the overall mission of Stripe, where we're broadening access to entrepreneurship and making global commerce easier. And so there is a real social good that we care about at Stripe. And then there are other things we care about. We have this part of the business called Stripe Climate where we're funding carbon removal technologies and offering that to our customers, and we can go into that. However, I think, I'm curious what you think, just the whole ESG movement has gotten into a very kind of checkboxy exercise and, you know, an excuse for people to focus on things other than being good fiduciaries for their shareholders and ended up with a lot of waffle, basically.

19:16What about DEI? Are you all a bunch of white tech engineers who are all a man or not the case? No, again, similarly here, I think if you were to kind of go walk the hallways in Stripe and meet people, it's a very diverse group of people who kind of make up the constituency that is Stripe. But the public debate about that has gotten kind of funny. Now, you're pretty well known in the tech world. So if you walk down the streets in New York City where we are today, I don't know whether people would recognize you. But if you go into a restaurant in Silicon Valley, I assume everybody comes up and says, here's my resume or something like that.

19:52Can you go in Silicon Valley and not be bothered by people trying to get something from you? Yeah, it's still fine, actually, because remember, we sell to businesses. We're not on TV all the time. And people just, I think, aren't that interested in the payments industry, which we like. It's nice to be in a boring part of the industry. How old are you now? I'm 33. 33. Okay, well, pretty young. So let's suppose when you're 43, 53 or 63, what do you want to be? You want to be a wealthy entrepreneur, build another company, be a great philanthropist, art collector. What is your ambition 10, 20, 30 years from now?

20:31Well, first off, I'd be very happy running Stripe. I expect to be running Stripe 20 years from now, because again, this is just the kind of problem that has returns to time spent on the problem. And the payments industry is actually changing quite a bit at this very moment in time, where we're seeing, for example, more global heterogeneity in payment systems. Like 15 years ago, everyone maybe just paid online with a credit card, whereas now every different country has a different you know you've seen the growth of upi in india or alipay and wechat in china and things like this and so you need something like stripe to knit all these together and we're just very early in the digitization of commerce broadly and so again this is a to me a very um fulfilling satisfying problem that i'd very happily be working on in 20 years however um we're also kind of getting more interested in philanthropy and i think trying to uh learn about that and do it in a more bottoms up way and so we have a biomedical institute that We helped start ARK.

21:32And there's various other kind of projects that we back. So has Bill Gates been after you to sign the giving pledge? I have not talked to him about it. Really? I'm sure after this interview, he'll be calling you. We're doing a bunch of giving. So we're already on the program. So sometimes people that are entrepreneurs say, I have one great idea, but actually I'm really smart. I can have two great ideas. So I have one great idea. Now I'm going to start another company because I'm also so smart. I can think of another great thing. So is that a burning ambition to start another company? Or this one is basically this is going to be your life's passion?

22:02You know, it's hard enough to have one good idea. And, you know, Charlie Munger had the great quote about, you know, taking a simple idea and taking it really seriously. I think maybe people don't take the core idea seriously enough, where the idea behind Stripe is we think that there could be more Internet commerce, more successful Internet companies created if we lowered the cost of doing so, if we made it easier to do so. And we're taking that core idea really, really seriously. So if somebody is watching this and they want to take away from this interview something about Stripe, and you could summarize in a paragraph or two what you would want somebody to know about Stripe, what would it be?

22:43How would you summarize what somebody should know when you'd like somebody to know about Stripe? One could be this idea of, you know, taking an idea and taking it seriously. And again, we started with we want to make it easy for Internet businesses to accept money. And we just kind of kept running with that. The thing maybe is that within the look, I think Silicon Valley entrepreneurs tend to try to, in retrospect, go back and tidy up the story and make it seem like they had everything figured out on day one. and our mission, we set out to go solve X, Y, Z. I think the way it tends to actually happen is that there's a bit of experimenting.

23:35You don't know where it's going to go, but the domain teaches you as you go if you're paying attention. And so with Stripe, we never thought that there'd be as much of an opportunity to be a global payments infrastructure as we did, but we could learn from our customers. Similarly, we never thought large businesses would use Stripe, like some of the companies I mentioned, like Amazon and Hertz and those folks using us. On day one of the business, we never thought that would happen. But we noticed that larger and larger businesses were reaching out to us and needed the services, or the businesses on Stripe were growing.

24:04We also had companies like DoorDash and Instacart, who started as very small companies and obviously are now very successful public companies. And so I think the thing that maybe people underrate is being in a domain teaches you about that domain if you're willing to pay attention. And a lot of business success can come from listening to what the market is trying to tell you. Thanks for listening. To hear more of my interviews, you can subscribe and download my podcast on Spotify, Apple, or wherever you listen.