Kirkpatrick: Stripe is one of the hot startups in San Francisco right now. It’s doing online payments. Patrick started it with his brother after they got frustrated with trying to build a web site that accepted payments themselves and they realized, “Oh, there’s a problem here.” But now they’re pushing into new areas. They’re working with Bitcoin. They’ve got their own Bitcoin alternative called Stellar.
I want to say one housekeeping thing before we get started with the conversation. We’re going to have dinner after this and then we’ll return for a panel about one of the biggest questions, “Can technology contribute to equality and peace?” after dinner and that will be in Navio which is behind me.
Patrick, the reason we wanted to have you here among others was when Simone and I came to visit you in your office and we started talking about Stripe, and I’m thinking, “We’re going to hear about payments, very cool,” you immediately started talking about being a platform for innovation. I thought that was very cool. Explain how Stripe is a platform for innovation and what is it that you’re really trying to accomplish in that regard.
Collison: Seems I dodged two bullets. I neither need to describe an algae battery nor how can technology bring about world peace. On Stripe, we started it as a side project. We didn’t think it would grow into being this much larger thing. As we spent time working on it there were three things that occurred to us. The first is that we’re at this juncture with the Internet where in the earlier days the Internet was very much about entertainment; the Internet replacing your T.V. and a lot of the really successful Internet companies, in some way, are around that idea. So Facebook, or Twitter, or Zynga, if you think about what they’re substitutes for it’s largely other forms of entertainment. But now, and especially thanks to the rise of mobile devices and the Internet sort of really becoming a global phenomenon, the Internet is increasingly, and software is increasingly, becoming a utility. If you think about all these new mobile apps as sort of magic wands for the world. This is what I think is the most interesting part of the Internet and software sectors today. The business models for those are necessarily much more around commerce. You’re not monetizing people’s attention, but rather providing core goods and services to them that replace whatever they might do in the real world.
The second is, I think we’ve taken this really myopic view of what commerce on the Internet as a whole can be. People adhere to those payments on the Internet as something like this, and give an instinctive shrug of the shoulders, “I bought things online. What could be new there?” But when you sort of take a step back and you look at it, we’re so early in facilitating what could and should be possible. Even if you start excepting payments with Stripe today, I mean I wish we were further along on this trajectory, but a majority of Internet users still can buy from you. You can accept credit cards, but most Internet users don’t have a credit card. Credit cards, by and large don’t work in Latin America or in Southeast Asia, or in Africa, or wherever the case might be. As the Internet becomes properly global it’s really imperative that we figure out how to enable everybody to participate in this economy. It doesn’t just go for the buyers, but especially for the sellers. Right, and we’re lucky, we’re here in Half Moon Bay, we’re in the U.S., we can pretty easily start an Internet business today. But if you’re like most people in the world, not in the U.S., if you’re in Indonesia, if you’re in Pakistan, if you’re in Nigeria, you literally can’t do it.
The Internet in some way makes geography irrelevant but—
Kirkpatrick: You could not create a global company is what you’re saying? You could make one that accepted payments potentially locally, or not even that?
Collison: You can do it locally. You can certainly accept cash. You cannot create an Internet company. I think part of the reason you see such a balkanization in the Internet economy as a whole, this whole slew of say, Chinese companies, money essentially can flow across these borders, so it’s no wonder that you completely have this separate economy there.
The third thing, which is most closely aligned to our background, is that I think it’s really important to build good tools. The returns on that are often underestimated. We’re just hearing how Moore’s Law is not inevitable and sort of the production of innovations that facilitated this. I think the kind of innovation that come from software, from the Internet, this stuff isn’t inevitable and it requires really good robust, easy to use infrastructure, except its’ not just available to the largest companies. The idea with Stripe is that we should take what the very best companies can build themselves, let’s say, the commerce infrastructure that Amazon can take advantage of, and make it available to every single developer no matter where they are, anywhere in the world.
The litmus test, whether or not Stripe is a success is: Are more companies getting started? Are more people on a level playing field no matter where they are in the world?
Kirkpatrick: Wow! That’s pretty ambitious. I’m excited. That’s why we wanted to have you here. It’s interesting. I remember Sarah Lacy once went to Lagos, Nigeria and found all these startups there and wrote a nice piece about it, but what you’re saying is those companies are fundamentally crippled in their ability to grow because it’s not a country where people have a lot of credit cards.
Collison: I’ve seen it firsthand myself. I was at the iHub in Nairobi in Kenya and it’s a super cool tech space with a bunch of companies getting off the ground there. They actually have some really interesting innovations like, people have now started to hear about M-Pesa in Kenya or maybe systems like Zaad in Somaliland, things like this. There is absolutely amazing technological innovation there, but I was hearing first hand from the entrepreneurs there that they are fundamentally kind of crippled. They have access to the same educational resources that we ourselves have access to. Codecademy works just as well in Kenya as it does here in the U.S. They can take advantage of things like AWS or EC2, or whatever the case might be, but they can’t accept payments as a U.S. or Western European company might be able to. If you can’t receive money that’s a significant stymieing effect on your ability to actually run a business.
Kirkpatrick: It is the case there are astonishing concentrations of entrepreneurship in almost every city around the world. So, these people are really waiting for you to succeed?
Collison: Every community has a—
Kirkpatrick: Or else they’re monetizing with advertising, right?
Collison: Right. I think every community has a narrow-mindedness and an inward looking–ness and solipsism or whatever. That’s just kind of the nature of communities. I think it’s especially acute with regard to the globalization of the Internet because for a long time the Internet really was a North American and Western European phenomenon. That’s really where it started out. But now because of mobile devices, again, and because the general suffusion of technology, the Internet is becoming truly global at a really rapid pace, but the infrastructures are severely lagging. I think people still kind of have this 2001, 2005 mindset and haven’t appreciated that there are billions of people around the world who should be starting the kind of companies we’re talking about over the next couple of days. But the infrastructure isn’t there yet.
Kirkpatrick: How are you doing? I know you have had some big successes. You’re behind a big chunk of the Apple Pay thing, and how you’re in a number of countries. Talk about where the company has gotten so far, because I know it’s quite far. How old is it?
Collison: We launched just over three years ago. We’re sort of proud of a couple of the announcements over the last couple of months for we’re powering the buy button on Twitter, we’re trying to do something similar with Facebook, and a majority of the apps in the app store that use Apple Pay, are powered by Stripe. But honestly, the one that I think is coolest, and the one we got the most out of this year was, and this is actually the one that got the least attention. We did this partnership with Alipay. When we first started having conversations with them lot of people hadn’t even heard of them. Alipay is the largest payments company in China. It’s used for the vast majority of online commerce.
Kirkpatrick: Owned by Alibaba.
Collison: Owned by Alibaba.
Kirkpatrick: Not actually owned by Alibaba, that’s another story.
Collison: Very closely affiliated with Alibaba. What we did with them is we made it possible for any Stripe user to go an accept payments by Alipay. This is the first time that a lot of these, again, Western business were able to transact with people in China. I guess it seems so crazy to me. This was an opportunity that still existed and a problem that had to be solved in 2014. We’re 20 years into the history of the Web and an unsolved problem was still: how am I, as an American company, to transact with somebody in the most populous country in the world.
Kirkpatrick: So, what you did, Alipay payers to pay through Stripe to an American company or companies in that—
Collison: Actually not just America. Any of the countries where Stripe operates.
Kirkpatrick: But you gave a good example of something that happened as a result of that when we talked on the phone. Is that worth mentioning?
Collison: Yes. I’m not sure we can disclose the identity of the company. When we were going and telling some of our users about this, again, it’s sometimes hard to describe the potential of something that doesn’t exist yet. It’s much easier to see the concrete once it’s been realized. And so we go and talk to users and we’d tell them they can now sell to an additional 1.3 billion people, and they’d say, “You know. I’m not sure how important this is to us. We don’t actually have that much revenue coming from China.” It’s like—[LAUGHTER]. Exactly. Anyway, some of them managed to get past that and enabled this Chinese commerce on their sites. One early test in particular that we did, the conversion rate from Chinese traffic, just as a result of making this change—if they didn’t translate the site to Chinese, they didn’t do any marketing in China or anything like this. They just enabled their existing Chinese traffic to go and actually make purchases and their conversion rate increased by a factor of 10. I think, again, to get back to the earlier point, people really underestimate how early we are and that the trajectory of commerce on the Internet, and how much of this stuff is going to flow to the software companies. A stat that really surprised me when I first learned it was, across the world about 2 percent of all consumer spending takes place online, 98 percent is still offline commerce. Again, even though this mature veneer to what’s taking place to in e-commerce, really 50x more is still taking place in the offline world and I think there’s still a huge amount of transformation left. If you think about how much you spend or the people who are cohorts spend, it’s probably more like 20 percent, 30 percent online. As you think through the consequences of that happening on a global scale we really haven’t seen anything yet.
Kirkpatrick: Very cool. You’ve talked about what you’ve enabled globally and especially in economies to where they haven’t had the ability to transact online at all. How many countries are you in now by the way?
Collison: We enable buyers from over 100 countries around the world and then we enable sellers, businesses to get started, in 18 countries.
Kirkpatrick: Okay. There were clearly some problems even here that gave you an opening because initially a lot of your customers were here, and you yourself were trying to start something here which led you to realize this business was needed. What is the critical function you perform that other systems have not been performing?
Collison: I think the thing that we—honestly, a lot of this was accidental. We sort of realized it post-hoc. We were just really lucky where we sort of got started and I think around—people are starting to talk of this idea of the rise of the developer. Maybe 20 years ago if you were thinking about who would power your payments; that would absolutely be a decision made by the CFO, or sort of the finance side of the house, right? But increasingly companies are recognizing, this comes back to Reid Hoffman’s point an hour ago about how companies need to have a technology strategy. People are realizing they should listen to the developers, the developers can see what’s coming, that a lot of the company’s future is going to come from the technological side of the house. What we built, and we were just building for ourselves, this wasn’t a ground strategy, what we built was a system that was really finely tuned directly to the needs of the creators. So, at the time it had really obscure things like API documentation, it was really easy to start experimenting, you could try out a new business model more easily, you could build a new product much faster. What we started to see was that—obviously startups love this because it was way better than sort of the baroque bank-dominated system that prevailed before, we even started to see large established companies start to build on top of this. Within the first year of Stripe, Walmart started building a bunch of their new infrastructure on top of Stripe because it was easier for them to build on top of Stripe than it was to build on top of their internal payment infrastructure. So, there are sort of two ways in which I think Stripe enables more companies to get started or more commerce to happen. The obvious one is of this geographic element where there a lot of buyers and sellers around the world both being enabled, but I think the really interesting ongoing one is: by lowering the barrier to entry and providing, again, the best tools in the world, even to a single individual, I guess the pervasive lesson of the Internet is the easier you make it to do something, the more of it that happens. As you go from having to create your own websites, to blogging, to tweeting, sort of all those increase the amount of content production that happens. I think similarly the lower the barrier to entry to engaging in any kind of online commerce, the more it will happen.
Kirkpatrick: Really cool. If anybody has a question or comment I’m eager to hear them. I have plenty more.
Collison: If you would like to enable Alipay on your website.
Kirkpatrick: You and your brother came from Ireland to start companies in the U.S. Why did you do that?
Collison: We actually originally came over for college.
Kirkpatrick: But you stayed.
Collison: But we stayed. I guess it’s still the case that Silicon Valley has this amazing network effect. We’re all here and not, sadly, in Ireland. Although I guess some people were probably in Ireland just now for the Web Summit.
Kirkpatrick: A few people in the room actually. Yes.
Collison: We were really entranced by Silicon Valley. Having said that I think—one of the ideas that really excites me about Stripe is this idea of globalization and actually one of the things more broadly I’m most optimistic and hopeful about being different in the future is that we get past this insane idea that immigrants are problems to be dealt with for our country and I expect in a century’s time countries are competing, have the most have the most immigrants.
Kirkpatrick: How many people work at Stripe now?
Collison: We’re almost 200 people.
Kirkpatrick: Three years old, 200 people. Those immigrants did okay for our economy.
Collison: What I love is that so many people at Stripe, us aside, are from outside the U.S. in that we, kind of thinking through the early people at Stripe, folks from Nigeria, from Honduras, from Sweden, from India.
Kirkpatrck: That’s not going to make your political point as much, but still, it’s impressive. Let’s talk about Bitcoin for a minute because I know you’ve been an advocate of it and you also have created your own alternative to Bitcoin with Stellar. It’s pretty obscure stuff for some of us, including me, but can you simplify why you’re excited about Bitcoin for the ordinary ear?
Collison: Yes. Bitcoin is obviously a lot of different things for a lot of different people. I think it’s sort of this Rorschach test. Everyone projects their own idea of financial utopia onto it. A lot of the original themes behind Bitcoin, I think, aren’t that compelling. There’s this sort of monetary sovereignty idea that wants to overthrow the shackles of our monetary oppressors and the Fed and the dollar, and whatever else. That I think is—
Collison: That I think is kind of stupid. I’m personally perfectly happy using the dollar and as long as we pay taxes in dollars I don’t think that’s going to change. Then there’s the idea—maybe this is less firmly endorsed as a result of the take downs in the last couple of days, but there’s the idea that you can use it for all kinds of illicit trade, it’s untrackable and whatever else. The one I think is super compelling about Bitcoin is this idea of universality, and so again coming back to the geographic point, you have somebody in Lahore, you have somebody in Minneapolis, how do they transact? We have the Internet. We can exchange data. Money is just a kind of information, it kind of data. Why is this not easier? Why do I have to go to the bank, fill out paperwork in Latin, and recite the Lord’s Prayer? I think that aspect of Bitcoin is fantastic. From a Stripe perspective we want to do everything we can to support it. So, we announced support for Bitcoin in Stripe back in March of this year, and we’re making better support for Bitcoin available as quickly as we can.
Having said that, I think Bitcoin when you think about it from that basic user experience standpoint, from the perspective of being better able to make these transactions and go through this commerce, it has a bunch of obvious problems. Firstly, you have to deal with bitcoins. What is a bitcoin? What is a bitcoin worth? The answer depends on what minute of the day it is. Bitcoin transactions take somewhere between minutes and even up to an hour to clear. It’s really difficult to get your hands on bitcoin. You have to wire money to some European bank account, or whatever the case might be. Good luck explaining this to some other family member. We would love for Bitcoin to go and solve these problems. We’re not in any way anti-Bitcoin. I hold bitcoins myself, we’re enthusiastic Bitcoin supporters, but when we heard about this non-profit Stellar, which is separate from Stripe, though we backers of it, we thought it was really compelling because it fixes a lot of these user experience issues that we see in Bitcoin. With Stellar you can use regular real world currencies. You can use dollars or euros, or RMB, or whatever the case might be. Transactions clear instantly and it’s really easy to get your hands on the currency to get started and start making some test transactions. I think that’s really powerful because Bitcoin has been so overtaken by this speculation, and the ups and downs of the currency, and the ecosystems that are really oriented towards that. Whereas with Stellar they’re just giving a way the currency as quickly as they can to people anywhere in the world. I actually had a Stellar board meeting on Friday and they were showing us the commerce that’s now taking place in Indonesia. It’s really easy for people in Indonesia to get their hands on stellars, and people are trading stellars for mobile minutes, and all kinds of new use cases like this. For me that’s so much more compelling than some guy in New York or L.A. or San Francisco or something.
Kirkpatrick: What is it that makes it easier to use?
Collison: Instant transactions, supports real world currencies, and you can get your hands on stellars in five minutes.
Kirkpatrick: But it has that universality that you like.
Collison: Exactly. It’s exactly the same decentralization universality as Bitcoin. Does Bitcoin succeed? Does Stellar succeed? Do both of them succeed? I don’t know. But I’m optimistic and a supporter of all of them.
Kirkpatrick: We’ve run out of time, but the reason I wanted to have you up here, I think you are an incredible exponent of the optimistic mindset of young entrepreneurship. Your successes so far, I’m sure, is only the beginning and I really think your vision is quite compelling. Thank you for joining Techonomy.
Collison: Thank you for having me.