Transcript
0:00 Good morning. hopefully this clicker works. So, I sat down to write this talk, I really racked my brain to try to figure out what the most interesting and relevant and and useful content would be for a lot of people who are sort of interested in web startups. And when I thought about it in those terms, the the topic of my talk became fairly obvious. But then But I thought about it more and the algorithm doesn't even seem to be deterministic. I'm not sure anyone even knows how it works. So, I guess I'll actually have to talk about Stripe instead.
0:40 Two years ago, Brian from Airbnb spoke at Startup School in 2010. And he opened his talk by showing a picture of Startup School in 2008, 2 years previously. And that picture showed a a snapshot of the audience. And he picked out one particular head. He was just sitting there, an anonymous head in the audience. And I know this because I was at his talk in 2010. And so, 2 years later, he was on stage at Startup School and somehow, 2 years later, here I am.
1:09 And I'm sure there's at least one person here who who'll be on stage in in 2 years' time. And Stripe definitely isn't as far along as Airbnb, but, it really drove home the point to me when I realized this that startups are very unpredictable. You know, startups are just really hard to get your head around. I remember somebody telling me not all that long ago that that Airbnb was just becoming a huge success. They were making something like $10,000 a week. I remember thinking, man, that's really impressive. And now, I've no idea what Airbnb's actual revenue figures are today, but it wouldn't at all shock me if they're making $10,000 an hour.
1:48 Like, what'd it even like to try to build a company where that kind of growth is possible? Startups are strange for a for a bunch more reasons. you know, they're usually kind of counterintuitive because if they weren't counterintuitive, somebody else would probably have solved whatever the problem is already. And on top of that, startups often don't actually don't actually want to be all that well understood. it can actually be quite helpful to be sort of underestimated and undercomprehended.
2:13 but I think the biggest reason that startups are hard to understand is that so few people still get to see them up close during those first couple orders of magnitude. And when people do tell the stories or or when the stories are told, they they often tend to be kind of wrong. They're about sort of rocket ships and frantically holding on and trying to add more server capacity as quickly as you can to handle the next million users.
2:36 They're not about the late-night arguments and wondering if your product could ever possibly work or trying to figure out once you've launched your product why it's not growing. And the thing is, even the really successful startups have this phase. That that that famous summer when Facebook moved out to Palo Alto in 2004, most people don't realize this, but there were other people in the same house working on other startups. Like this is the most successful technology company started in the 21st century and in the same house there were people working on other startup ideas 6 months after launch. It's It really takes a while.
3:10 And so, Stripe is obviously very very different to Facebook and Airbnb and and nowhere near as sort of far along as they are. But we've now gone through a small bit of growth and so I want to try to describe how it how it actually works. In October of 2009, John and I were walking home from dinner in Potrero up in the city. And we'd sort of been kicking around this idea of starting an online payments company. We're really kind of fascinated by the concept of internet payments and all the other companies in the space seemed like total dinosaurs.
3:40 and as the web sort of spread around the world and more deeply into our lives through mobile devices, it seemed kind of obvious there should be some kind of universal payments infrastructure for the internet. That should be just really easy to transact online. And John just turned to me and said, "You know, why don't we debate about it? You know, why don't we just go build it? It probably won't be all that hard." He actually said that. It probably won't be all that hard.
4:03 >> >> And so I said, "Okay, sure. Why not?" To backtrack a little bit here, John is my co-founder at Stripe. he's also my brother. And people often ask me about how this works in practice. And so for the record, starting a company with your brother turns out to be a really good idea. John is not only one of the most brilliant people I know. I think he got the highest ever results in Ireland's university entrance examinations.
4:29 But he's also someone with whom I have literally decades of experience building things. Here's an earlier venture that we worked on together. And so it's October 2009. We decide to work on this online payments company. We decided to call it {slash} dev {slash} payments. You know, the API should be just as straightforward as any other node in devfs. We're kind of okay at programming and definitely not at naming things. But everyone else seriously have been targeting their product at like they thought it was a finance sector product.
5:01 They were targeting it at CFOs and at business people. And we thought the internet was just moving in a completely different direction. We decided to target makers, the people actually building things. We thought that internet payments was a technology problem. And we wanted to build a completely new stack for anybody transacting online. So we worked nights and weekends. We were both in college at the time. I was at MIT and John was up the road at Harvard. And so we code together in the evenings between problem sets and and writing papers.
5:28 January rolled around, which for both of those schools you you sort of have that month off. But of course, anybody who knows Boston knows that January in Boston is unbelievably freezing. And so we decided to go somewhere else to work for the month. We'd read a few blogs that claimed that Buenos Aires was surprisingly a really good place to get things done. It's it's pretty cheap. It's really warm. It's friendly. For some reason, I don't know why, there's Wi-Fi everywhere.
5:51 Everything happens on a really late schedule. Like the bars are open till 5:00 a.m. Nobody has dinner until midnight, and nothing nothing starts before noon. it's basically a city on a programmer's schedule. And so we read all of this and we're like, "Great. We'll go to Buenos Aires." And so we did, and we just worked non-stop in cafes for 3 weeks. I I've still never seen a single one of like the tourist attractions in Buenos Aires, or I mean I just don't think they exist.
6:16 And I And then we'd like we'd code all day and we'd go to dinner at 11:00 or something and then go to bed. I can't emphasize this enough. If if you want to get something done, consider going to Buenos Aires. And on January 9th, we we got our first production user for Stripe Stripe Dev Stripe Payments. I can barely say it. And then this is only a few weeks after we'd started working on it. but we really wanted to get production users shaping the product as as quickly as we could.
6:46 The user was a friend of ours, a guy called Ross Boucher, who was working at a company called Twilio North at the time, which was also actually YC-funded. And funny enough, he actually became the seventh person to work at Stripe, but that's a that's a separate story. Here's a screenshot of what Dev Payments looked like at the time. and in this screenshot, you can see that John and I are definitely programmers and not designers. But okay. So, January 9th. we now have one user.
7:12 >> >> There's There's a great story from the early days of Amazon about how they celebrated when they got their first buyer who wasn't any of their moms. And you know, Ross wasn't exactly our mom, but he was a good friend. and so we definitely weren't out of the woods just yet. So we went back to school, and we continued to work on Dev Payments in our spare time. There was this one cafe that I worked out of so much they like took pity on me, and I'm still Facebook friends with a bunch of the baristas.
7:42 And so yeah, like Stripe is a kind of an unusual company. We're about technology, but we're also about payments. And the technology side requires good reliability and you know, clean APIs and a really nice product and sort of lots of technology things we at least hoped to know something about. But the payment side requires working with banks and dealing with credit card companies and just generally handling a slew of finance industry issue issues. We really had no no experience with and no idea how to handle. We had a lot of meetings where we sort of sat somebody down and said, "Right, so payments.
8:16 How do they work? and you know, programmers often and this is unfortunate sort of look down at the folks who are trying to learn to code, the sort of I want to learn Rails for my web startup crowd. But I actually got a sympathy for them because we were that but but in finance. Summer came around. We're now 6 months in. We moved out to Palo Alto and though we hadn't actually yet decided to take leave from school. We found a tiny bungalow just off University Ave. The living room and the kitchen became our office. It was pretty hot we didn't have any air conditioning and so John just slept in the garden most nights.
8:47 he wouldn't allow me to post a picture of this. and by and large we just kept on writing code because I mean, that's mostly what starting a software company looks like in the early days. You're you're either writing code or you're talking to people who use the code or you're probably wasting time. And here's a chart of our transaction volume over the first 6 months. And and that's not a technical error. if you look really closely you can see a tiny little wiggly line at the bottom.
9:14 It's admittedly not wiggling all that much. Around this time though, we did have our first person join. we're based in Silicon Valley, home to the best international talent from Berlin to Beijing to Bangalore. And so of course we took full advantage of it. We hired a guy called Darragh Buckley who was one of my smartest friends from college. And he grew up in a small town called Limerick in Ireland about 2 miles from where John and I grew up.
9:37 We also raised our first investment our first real investment, I guess. YC had obviously already invested. and this was from from Peter Thiel. Up to then, we hadn't told very many people about DevPay Payments, and those we had told had reacted mostly by telling us that we were crazy. But of course, luckily Peter Thiel is crazy. And so, he invested, and it's been really helpful to to have him on board. Soon after that, we moved into our first office, which looked something like this.
10:04 it's actually sort of it's it's at Ramona and University in in Palo Alto, just next door to Caffe Cubano. It's actually a converted house, and because it was a house, it had this wonderful fireplace that we all delighted in the winter. the fireplace looked something like this, which I think may have contravened some fire in the workplace codes. And basically, we were just working non-stop. we we actually had a we we became four people around this time. The the first person The fourth person was a guy named Greg. I remember when Greg was considering joining and dropping out of school, he asked me sort of about our our work schedule, and whether or not if we worked weekends.
10:36 And obviously, we did work weekends, but I really didn't want to make it to sort of scare him off and make it seem like he'd have to. And so, so I sort of said, "Well, you know, we usually work some of the weekend. We really care about work-life balance." And Greg just cut me off, and he's like, "Great. I'm glad we're on the same page of working all day, every day." And so, we knew he'd fit in.
10:53 We decided to change our name. I can't even begin to list the problems that SlashDev SlashPayments had. >> >> Somehow, it turned out that not everyone immediately got the DevPay technology. nobody was really able to get their head around the whole slash thing, and we started to get mail with things like this. >> >> And then there was the admittedly pretty inconvenient fact that Amazon had launched a product, an online payments product, called Amazon DevPay. And so, it pretty clearly just wasn't going to work out.
11:24 And so, we spent hours brainstorming names, and we eventually came up with the name Stripe. And we didn't actually think that Stripe was all that great a name when we first came up with it, but we decided to just put a date in the calendar and if we didn't come up with a better name by that date, then we'd stick with Stripe and sure enough it became Stripe. And actually a few months later I learned that this is how Apple ended up with the name Apple. It was the exact same date thing.
11:44 But anyway, we reached the end of our first year mostly intact. A bunch of Y Combinator companies started to use Stripe and and that was pretty good. We're we're getting some real feedback. And here's another chart. This is our transaction volume through the first year. And so you can see still kind of a ways to go. We spent January of 2011, our one-year anniversary, in Rio de Janeiro because January in South America was now becoming a tradition. As anyone who's been to Rio de Janeiro knows, it's one of the most beautiful places on Earth.
12:11 And of course we took full advantage of it. At this point, we're still in invite-only private beta. And so there probably is something obvious we could have done to grow at least a little bit faster, i.e. to launch. A friend refers to invite-only private beta as the baby blanket of startups. And I think that's about right. But the beta period was actually really helpful to Stripe. I remember Paul Buchheit saying that you should start out by making 100 people really happy rather than many more people only a little bit happy.
12:43 We really took this to heart and took advantage of the the small number of users to sort of really focus on them as much as we could and to sort of really try to figure out what they wanted. So for example, not long after we launched the first version of Stripe, we added pager duty so we'd all get called when the site was down, you know, pretty standard and pretty reasonable. But then we realized that anytime a user gets any kind of error, like even if the site isn't down, that's actually a really bad experience for them. And we could probably make them much happier if we went and investigated the error and sort of proactively reach out to them and and help them fix it.
13:14 And so we changed the code a little bit so that anytime anyone hit any error, it would send an email that would go sort of straight to the top of everybody's inbox and it would also phone everybody. and and we'd go and fix it no matter what. And and I really mean that. Like, we would get out of bed if necessary. we're basically never without a laptop and the means to tether. here's a photo of one such incident.
13:38 this is Greg and I. We'd gone to the cinema in Redwood City. a user encountered an error and so of course out came our laptops and and we had to go fix it. I think Greg I think Greg is here somewhere actually. and I think he still feels a little bit bitter about missing the the start of the movie over this. The movie may or may not have been Twilight: Breaking Dawn. Startups are high stress. You need to unwind.
14:00 We also realized that I am in with an engineer is basically the best support experience possible. Like, it's really frustrating to have to go and to to file a ticket and or like find the support email address and then wonder does this company actually reply to their support emails? Or if they do reply, how long does it take them? Or all these issues. Like, it's much nicer when you can just start sort of directly chatting with somebody.
14:18 And it's also way more productive for us because we can then go and sort of try to figure out what the underlying issue is rather than having to sort of guess based on the user's initial description. So, we just opened up this this chat system on our website where anyone can jump in and just start asking questions. And we actually still have this today and and that was that was that was really good. But then we thought why stop there?
14:38 isn't it really a really bad experience when somebody asks a question and there's nobody there to answer them? And so we thought, aha, pager duty. And so we hooked it up so that if you ask a question in the Stripe chat room and there was nobody there to answer you, it would go and phone one of us after 30 seconds. And so I don't think many people know this, but like for many months at Stripe, if you asked a question in our chat room and there was no one there to answer, someone would be woken up if necessary to help you.
15:02 We don't do that today. and so though Stripe wasn't yet publicly available to everyone, we really tried to sort of turn up the dial on our users' feedback and to force ourselves to be extremely sensitive to what they wanted and to what their experience was like. We had our users talking to us during every waking hour. And if anything went wrong for them, they were like literally interrupting our sleep. The other thing that kept us in beta was the fact we weren't just building a thin software layer. And we thought that Stripe should encompass everything from the API requests to have the money end up in your bank account, and we wanted to be able to define the complete experience, and we wanted to be able to do it at scale.
15:40 We were we were sort of really influenced by things like Amazon Web Services and EC2, which is just it's a it's a really interesting innovation because EC2 is fantastic if you're a small company or a startup startup or a side project or something like this. But it scales right through to be a Netflix or a Zynga or indeed an Amazon. it it it'll work for a company of any size. And we decided that we wanted to do that but for internet payments infrastructure. We wanted to make something that was really easy to start with, but something that would also work for the largest companies in the world.
16:08 And so that meant working with really good banks. But the problem is that banks and startups are basically the business equivalent of of oil and water, and figuring out how to combine them is pretty hard. The best bank in the business is probably Wells Fargo, which powers some of the largest payments companies in the world. And honestly, it was pretty tough to to get them to talk to us or honestly even to like return our emails.
16:27 they probably thought we were some strange kind of Nigerian scam like make money online fast all from the comfort of your own home. So we asked a friend, an investor, and actually now a partner at Y Combinator, Jeff Ralston, to help out. Jeff had previously been CEO of a company called Lala, an online music startup, and they had negotiated successfully with the record labels. And we thought that if you could as a technology startup basically successfully with the record labels, you could basically convince anyone in the world to do anything ever.
16:55 And here's a picture of Jeff on a conference call with Wells Fargo, and that's that's Dara there on the other side. and you might wonder why is Jeff on the floor? Well, Jeff is on the floor because our office was also flooded at the time. and we also had a security audit that day. Sometimes startups are just like a reality TV show. It's like negotiate with one of the biggest banks in the world while undergoing a security audit, while wading through water, and I don't know, the water's full of piranhas or something.
17:25 But thanks to Jeff and a bunch of others, we eventually convinced Wells Fargo to become one of our back ends. this meant moving all of our systems to working up of their platform, and it was a couple of weeks of of honestly really intense work. We had to sort of hit a particular deadline. This is the night of our first successful transaction. this is John after another particularly long all-nighter. And in general, and I I kind of mean this seriously, like this is the unglamorous side of startups that people do not get to see all that much. Like you really want to make something work, and lots of other people think that it's a bad idea, and it's really hard, and everything happens much much slower than you'd like.
18:02 And you've sort of many late-night discussions like this and sort of soul-searching debates and wondering like is this actually a good idea, or maybe it is a good idea, but it's just too hard for us to pull off, and startups are hard. And the thing is, this doesn't actually go away. This is the thing that I didn't realize before doing a startup. I thought that sort of you'd have all these doubts in the early days, and then it would start to take off and things would get easy.
18:25 But no matter how successful, you will have lots of doubts. the first American to win the Tour de France was a guy called Greg LeMond, and he has this quote that I've always really liked. >> >> It doesn't get easier, you just get to go faster. And it's kind of like this with startups. like the startup might might start going faster, but it doesn't really get easier. In our case, we eventually got the pieces in place, and we got to the point where we're ready to launch.
18:51 We launched on the 29th of September 2011, so just over a year ago. At that time, Stripe had been in product had been in production use for 19 months, and and we'd been working on it full-time for for a year and 3 months. We were 10 people when we launched. I thought we could fit all the names in a tweet. And by the end of the year, here's what our daily transaction volume looked like. You know, kind of promising, but but launching is definitely not a panacea.
19:20 But the signs were positive and we kept going. And over the last few months, like two and a half years in, Stripe has finally started to become an overnight success. Jessica talked about how startups are are roller coasters and there's a lot of downs, but there's also ups. And then the next slide is our daily transaction volume through to today and it looks like this. >> >> From being four people not all that long ago, Stripe is now 34 people, which is actually twice as many people as are in this picture because everything is always behind on a startup and we haven't got around to taking our our new group shot yet.
20:04 And many thousands of companies are using Stripe and a lot of new ones go live every day. And I mean there's a bunch of well-known brands like Foursquare and Boxy and Hipmunk and BFF and New York MoMA. But there's a lot of less well-known ones, too, and and they actually tend to be sort of just as interesting. There's things like Good Eggs, which enables you to buy directly from local farmers, or Samasource, which brings computer-based work to people living in poverty, or even stuff like the Bedford Cheese Shop, which is now just selling its cheese online.
20:33 I guess I was just hungry when I was making these slides. Cheese seemed like a good idea. Okay. Has anyone here ever looked into the history of container shipping? Sorry, I know this is a bit of a context switch from cheese. Container shipping, like and and the shipping container, like the those 40-ft shipping containers. The On some level, they're the most mundane thing in the world and we we see them around all the time, but they were actually an absolutely enormous innovation.
21:02 60 years ago, before shipping containers, transportation was a massive issue with physical goods. Transportation costs often accounted for up to 25% of the final cost of a physical item. And overall, transportation costs and shipping costs were like 10% of the value of all the imports in the US. Like think about that for a minute. 10%. That means if your margin is 20%, just by bringing your good to another market, you cut your profit in half. and so unsurprisingly, most manufacturing happened to be very close to to where a physical product was consumed.
21:36 And so the shipping container, invented in the mid-1950s, essentially eliminated the cost of shipping physical goods. It cut the cost of loading and unloading ships by 95%. And it's now at the point where I'm actually quoting this from a US government report, it's better to assume that moving goods is essentially costless. Really and the history here is fascinating. There's a few kind of good books about it, but the point is like this technological breakthrough and sort of this this elimination of friction, and in particular, this abstraction over geography, it played an enormous role in in facilitating the rise of Singapore and South Korea and Taiwan and Japan and China as manufacturing hubs.
22:16 And my point is really that a technology that doesn't just monetize itself, but actually enables newcomers, can really enormous impact. Like the shipping container literally reshaped the world economy. We sometimes describe what we're doing with Stripe as building economic infrastructure for the internet. It's not very flashy. But for most of human history, we've had to buy from the people beside us. But and thanks to the internet, that's no longer true. We've a new way to abstract over place.
22:46 Anyone can now build a global business. But yet while the internet has revolutionized how we communicate and how we collaborate and how we share, we've only sort of started to explore how it can change what we create and how we transact and what kind of business is possible. And a lot of the other companies whose founders are speaking today are are pretty good examples of that. With Stripe, we simply want to turn payments into a ubiquitous utility. We want more commerce on the internet.
23:17 But it's still really early days. And honestly, most of the time we're not thinking about these kinds of problems. We're trying to figure out how to decrease the load on DB3. We're trying to get some particular design, you know, just right, and and working through the 20th iteration. We're wondering if some particular product is a is a good idea, or having some debate, you know, in Gmail that's so long we've overflowed the Gmail thread limits, and it's now become some completely new thread, or like it's all the the day-to-day stuff.
23:47 But you know, it turns out that all the high-level stuff, the the larger motivations, and the and the bigger ideas, and the day-to-day implementation, like the debates, and the tweaking, and the and the iterations, both of them are really addictive. And that's why we keep doing this. Thank you.