Two Programmers Turned 7 Lines of Code Solution into $95,000,000,000 Empire

Sanjay Priyadarshi on 2022-05-31

A journey I desperately want all young programmers to read about.

Photo from Youtube

The Collison brothers build a 7-line code solution that developers can put on their website to get paid.

This 7-line code solution resulted in a company called Stripe.

Stripe empowered every developer in the world.

Pre-Stripe companies had to invest hundreds of thousands of dollars to establish their own payment channel.

With Stripe, all businesses can set up their payment page in minutes. The Stripe team handled everything seamlessly on the backend.

They handled the credit card companies and all the legal and regulatory headaches. This made it easy for any startup to accept payments with the help of Stripe.

Stripe’s mission is to increase the GDP of the internet.

Where did the Idea of Stripe come from?

Both Patrick and John Collison were born in Ireland.

When they were in college they used to make iPhone apps. They used to pay college tuition with revenue from those apps.

Both of them had a habit of working on side projects.

They soon realized that it was easy to make money with iPhone apps. The reason was that it was easy to charge money on the iPhone app.

They thought that we created a lot of side projects online in the last few years and that we couldn’t charge for anything. It was because of the difficulty of accepting payments online.

In the month of October 2009, one day, both Patrick and John were returning from dinner together. They had been thinking of building something to accept payments online.

John told Patrick that:

“Eh, you know, we should just build a prototype together. It won’t be that hard.”

Stripe’s journey began this way. Stripe’s previous name was /dev/payments.

Stripe got initial customers with the help of YC

Patrick from the earliest days had been involved in Lisp programming. If you’ve heard of Lisp, you will know that it has a small community online.

The Lisp community helped Patrick meet Paul Graham.

Paul Graham is the co-founder of YC. Ycombinator(YC) is considered one of the most successful startup accelerators.

When John and Patrick created the easy-to-use Developer Payments API, they introduced it to companies that were about to get paid for their software.

The first 20 or 30 companies that agreed to use /dev/payments were all YC companies.

According to Patrick Collison:

“…who was on the cusp of need to start charging for their software, who was running out of money, they might need some revenue or whatever the case might be. And so I think that for the first maybe 20 or 30 users or thereabouts, they were almost all the YC companies or friends of people who we knew had gone through YC..”

As a startup, Stripe never went through the YC curriculum, but YC has invested in Stripe.

What did these two brothers see that other people could not see?

When John and Patrick founded the company, there were many institutional barriers to entry.

There were different regulatory challenges to deal with. There were many factors that could have demoted them.

It wasn’t that both of them were geniuses, but they had this strong desire to solve the payment problem.

At first, neither of them had a deep understanding of space. They just had a particular perspective because of where they came from and how they got started.

They had the mindset that developers, manufacturers, and software will continue to become more and more important.

They thought that once they create a good product, all the developers would start using it. They had no idea of the distribution strategy and the marketing mechanism.

They had zero ideas about enterprise sales and marketing. They had a naive understanding of the entire world. They were a bit lucky because the model they had and that perspective matched the world at that time.

Despite all the banking and regulatory problems, they never thought that the kind of regulatory and association/banking barriers was really that bad.

Regulators and banks can sometimes sound a bit intimidating. To handle all of that, the Stripe team has a lot of work to do.

According to Patrick Collison:

“…ultimately regulators and banks and so on are comprised of good people who want to do the right thing and may speak a different language or whatever but they’re reasonable.”

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Building a back-end relationship with credit card processors when Stripe was small

For Stripe, they had no choice but to build a relationship with the credit card companies.

Both the programmers, John and Patrick, had no idea how to build meaningful relationships with other companies.

At the beginning of Stripe’s journey, they worked with a friend of a person they met at a party and his friend who used to run a payment company. That person’s company agreed and let Stripe build the prototype on top of theirs.

Every time someone asked to open their Stripe account, John and Patrick received an email. They both fill out the paperwork and send it to another company they were using.

Once all the paperwork was done, the requested person obtained their Stripe account. They used to do all the paperwork manually.

After doing these things for a long time, they went to Wells Fargo and described what they were doing.

According to Patrick:

“And then we went and we met with Wells Fargo and sort of described what we were doing to them, and we’d gotten instruction through somebody and so forth and they unequivocally said that they had no interest in working with us.”

As time went by, things got more frustrating because Stripe was growing rapidly and they had to fill out more forms.

They went directly to one of their early investors for advice on this. The investor’s name is Geoff Ralston. He was the CEO of La La, which was an early version of Spotify.

La La was the first legal music services company. They used to do deals with all the record labels. Patrick and John thought that Geoff would be a good person to help them.

Geoff told them that it was actually one of Lala’s co-founders, Billy Alvarado, who knew how to deal with record labels. Geoff pointed to Billy, both brothers ran into Billy and Billy was ready to help them.

Billy Alvarado ended up joining Stripe and was one of the fifth or sixth people to join Stripe. Billy Alvarado went and solved all the problems with Wells Fargo.

What were some of the things Patrick Collison found they did well?

Paul Graham, co-founder of YCombinator(YC). He had written many essays online that are phenomenal.

In one of his essays, Paul Graham mentioned the Collison installation technique.

Generally, when a startup founder asks someone:

“Do you want to try our beta?”

If someone agrees to use their beta version.

The founder of the startup will say:

“Okay, I’ll send you the link.”

But this was not the case for the Collison brothers.

If some other company agrees to use their beta, they used to take other company member’s laptop and set it up right then and there.

They usually don’t wait long to acquire a single customer.

For Stripe, urgency played a big part in their success. Stripe is famous in YC due to its early user acquisition.

The first thing that helped Stripe stand out

Both Patrick and John grew up reading crowd-sourced tech news websites, hacker news, and internet blogs.

Before the launch of Stripe, both brothers believed that people were more likely to discover the right things organically and not just through traditional distribution channels.

Because of this belief, Stripe’s marketing strategy for a long time was to write good blog posts. The entire Stripe team was eager to write interesting blog posts.

They thought that if they made a good product, people would tell each other about it. They spend their time building the product in such a way that people feel compelled to talk about it.

Keeping the code solution to just 7 lines was a way to make sure people found the product easy to set up and talk about it.

Their sales and marketing strategy was initially simple.

They weren’t wasting a lot of money on product distribution.

Other startups invest millions of dollars in sales and marketing strategies. Whereas Stripe only worked through organic channels. In this way, Stripe was able to save a lot of money.

Stripe’s founders call writing blog posts a superior distribution channel.

What type of blog posts bring the most distribution?

Patrick named a guy, Evan, who works at Stripe.

Evan wrote how to debug python with gdb, which is a debugger.

That post didn’t have much to do with Stripe. But it turned out to be a good blog post. This post used to get a lot of traffic from Google and because of this single post, many people discovered Stripe.

These posts helped move the needle for Stripe.

This type of marketing strategy also helped Stripe grow as a product. It was because most tech company CTOs hate sales calls. Tech company developers don’t want to talk to anyone who only sells their services.

If you’re a developer, you know how allergic we all are to those sales meetings and calls. But the strategy through which Stripe moved its needle turned out to be excellent.

Initially, they relied on organic channels like Google. In this way, they were not only helping other developers but also associating their brand with those good blog posts.

Eventually, developers started to trust Stripe.

The second thing that made Stripe stand out

Stripe was using non-traditional channels for marketing.

If you think about traditional marketing, the main incentives are to promote the product or pre-announce things when they are actually ready.

According to Patrick:

“It is because if you’re talking at people and you are showing them fancy presentations but they’re not using the product directly and if they found out a year later it sucks, it is fine in the short term because you got the revenue for the sale.”

But as a startup, if you have to compete on the merits of the product and your company totally relies on people being honest about how well or how poorly your product works.

It forces you to build a product development organization that can compete with others.

It may be more difficult for you to gain initial traction due to your non-traditional marketing channel.

But once any company with non-traditional incentives gains initial traction, that company will have an advantage over the company with more traditional incentives.

The success or failure of a company does not depend on its name

Stripe was originally incorporated as /dev/Finance Inc, spelt SlashDevSlashFinance Inc.

Initially, they wanted to register as /dev/Finance, but you can’t start the company name with an initial letter ‘/’.

The first product name was /dev/payments because both brothers wanted to keep the product name broader compared to the company name.

The company name used to start with Slash, but the product name was devpayments.com. The naming scheme didn’t match.

In all the meetings with other companies, when they described what Stripe does, they used to fight an uphill battle.

At the end of each meeting, everyone asked for the name of the company. Even after saying the company name in the clearest way, people used to misspell Stripe’s old name.

For the Stripe team, it used to be a moment of celebration if someone spelt the old company name correctly.

They finally came to the conclusion that they need to change the name of the company.

According to Patrick:

“I think we’re just at some point trying to think up kind of single monosyllabic English words that didn’t have some kind of strong pre-existing Association.”

Stripe turned out to be one of those words.

Stripe.com was relatively cheap compared to other names.

They choose the name Stripe at random.

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Difficult time in the life of Patrick Collison

Throughout his journey of building Stripe, Patrick Collision has faced many challenges.

Most people think that he is superhuman.

In this section, we will talk about the challenges Patrick faced.

At one point, Patrick wanted to quit

Patrick finished a meeting with one of the company team members.

Immediately after the meeting, Stripe’s API was broken.

When Stripe’s core payment engine was broken, Stripe customers stopped receiving payments. They couldn’t accept payments from their customers.

At that time, Stripe had around 100 customers.

Even if it was only down for 30 minutes, Patrick felt bad that these things were happening with Stripe.

He didn’t want Stripe clients to face any problems.

According to Patrick:

“...particularly special about that day. I remember I guess I reflected on the sort of enormity of the challenges that we would face in the future and all the work they have to do and all the stuff that was still broken, all the people we have to hire, all the customer we have to convince to use us…”

That moment was the moment of vertigo for Patrick Collison.

Patrick was immensely discouraged and told his brother John that there was no point in doing all this. He didn’t want to go any further in this journey.

That day he learned an important lesson.

When you are a creative person, you remain in a strange psychological space in which you are both optimistic and pessimistic.

If you’re not optimistic, then why are you creating things in the first place.

At the same time, you are also pessimistic about things because if you are not pessimistic you will stop looking for the problems that you have to fix. You want to solve all the problems that exist with whatever you’re trying to create.

This is a rather strange mentality.

How supportive have their parents been?

When Patrick sold his first company for $5 million.

He had no idea what to do now. He first moved to Vancouver and then moved to his girlfriend’s house in Switzerland.

After that, he went back to MIT as he dropped out of college very early. He thought that he should become a mathematician or a physicist.

Four years after selling his first company until they launched Stripe. Patrick Collision was aimless and lost.

At that time his parents were very supportive. Their parents supported the two brothers when they started their first business and also when they felt lost.

Even in his school days at the age of 15, his parents allowed him to program for a full year and pursue a different career path.

What do their parents do to cultivate excellence without necessarily pigeonholing their direction

Both Patrick and John Collision grew up in rural Ireland. It was kind of a middle countryside surrounded by farms and fields.

They grew up as free-range children. There were hundreds of books available in their house and they could read quite voraciously.

Their parents allowed both brothers to explore their curiosity.

Three things their parents did to cultivate excellence were:

  1. They showed them both the world. They took them to the library every day.
  2. They give them a kind of agency on autonomy and treated them like an adult.
  3. Whenever both John and Patrick expressed an interest in something, their parents looked for an opportunity to fulfill it.

Interviews that helped me write this

Interview of Patrick and John Collison.

Patrick’s interview with Tim Ferris.

Paul Graham Essay.

Patrick Collison and John Collison Twitter.

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