Hey so before we start the show I want to tell you about today's episode and it's about software a seemingly simple payment system that was actually so complicated that none of the big tech companies wanted to take it on and the two guys who did were recent transplants from Ireland two brothers both college dropouts and as you're about to hear both super super smart this episode first ran about two years ago it is one of my favorites and I say that a lot but it really is I hope you enjoy it we built the first prototype back in October of 2009 and it was it really was apparent to us that kind I wouldn't be easy like it was not going to be possible for it to be some sort of well you know we code furiously for two months we launched this thing and then it's off to the races like from when we started working on at full time during a publicly launched was almost two years and so yeah gonna be hard but it is actually possible from NPR it's how I built this a show about innovators entrepreneurs idealists and the stories behind the movements they built [Music] [Applause] gaara's and on today's show how to brothers from Ireland wrote seven lines of computer code and built it into a nine billion dollar business so the holy grail for a venture capitalist is the elusive unicorn this is what hundreds or thousands of business school graduates working at venture firms search for every day they sit through pitch after pitch PowerPoint after PowerPoint hoping that today will be the day that one of these pitches will be the next Eber or Airbnb an opportunity so rare so coveted it's like a unicorn well welcome to today's story because stripe is basically a unicorn with extra whipped cream and cherries on top this was a company that went from zero to a hundred million dollars in value in a matter of months and today barely seven years after its founding stripe is valued at more than nine billion dollars so now your next question what is stripe well stripe isn't a thing you buy it's not like Under Armour shirts or Warby Parker glasses but it is what allows you to buy those things online if you use instacart or lyft or Kickstarter or even if you shop online at Target you're using stripe it's basically the backend technology that allows you to safely enter your credit card details and pay for what you want and there are two things that make stripe very different from its competitors the first is its simplicity it was originally just seven lines of code and a second the youth of the two brothers who founded it when stripe launched in 2009 Patrick and John Collison were just 23 and 21 years old the Collison brothers grew up in rural Ireland in County Tipperary where their parents ran a small hotel very small 12 bedrooms when he bought it and and we got a house maybe a mile or two away and so we grew up surrounded by farm line you know the options were to play in the garden and did a lot of that and to play with Lego and we did a lot of that and to read books and I look back at it very fondly so your dad was running this hotel and were you guys involved with it at all like did you have to go there on the weekends and like change sheets and and mop the floors well remember you know Pat I think it was Patrick's probably four when they started I was two and so you know there's only you know a two-year-old can only be so useful in the operations of the of the hotel I think my favorite memory is the you know the ballroom floor the highly polished surface that was awesome as a kid for for kind of getting a you know kind of a length game in terms of who can slide the furthest but much in all is I'd like to imagine that we were extremely useful in running the hotel I think we were primarily a hazard how did you guys get into coding how did that happen I bought a book when I was 13 and I read it one Saturday and started writing some webpages and really it was all said if I was all downhill from there yeah and how about you John did you like seeing Patrick get into coding did you think hey I won't try that - yeah that was definitely an influence and I think I had an experience that a lot of people I know who've learned to code had which is it's often an end result that pulls you along and you're making everything up as you go and you don't really understand you know you're copying things from a book or from a website and typing them into a computer to get it to work and it seems like the two big motivations that people often have are websites or for video games and so in my case the initial website I made was not very good after I'd built as Patrick taught me a lesson in insecurity you know I was probably 14 at the time and I called together this website and there were vulnerabilities and issues and stuff that Patrick then hacks this ice just to teach me a lesson on that okay so Patrick I mentioned this because you're not gonna mention this in 2005 you won an award like that I think it's like the young scientist award of Ireland you were 15 and or 16 or something like that and I'm assuming and and maybe you weren't cognizant of this but but we're mean people must have said oh they're the collison boys you know there's those two smart boys were you aware that you guys were just really smart I mean did you would were you aware that people were aware of the two of you when you were kids I don't think they were when we were kids I think actually this this kind of science contest is that was really the first time where anyone might have had even the slightest cause yeah to have kind of come across or heard of either of us what you do what was your invention or experiment or submission that when you young scientists of Ireland well as we sort of touched on I'd gotten really into programming and particularly become interested in this programming language called Lisp and I was kind of fascinated by lists because it had been invented in the late 50s like really early instead of the history of Technology but it'd been kind of forgotten and ignored the thing I worked on was sort of a new version of Lisp trying to kind of update it making it really straightforward to build sort of complicated web applications and things like that and you know it's funny it's only kind of looking back in it that this it becomes clear I mean for a very early stage I was interested in sort of working on tools or just kind of building things that created leverage for others in that basically the whole point of working on this programming language was to provide a tool that would make it easier for others to build things and so I you know I didn't consciously think about it this way at the time you can open starting stripe or whatever but basically all the things that I've worked on kind of somewhat seriously have in some ways been kind of tools for creation so in 2006 after Patrick won the young scientists of the Year award he decided to go to the u.s. to MIT for college and two years later John would follow his brother to Cambridge to attend Harvard but all the while the brothers were always working and conspiring on ways to solve problems they'd come across on the internet for example why it seemed so hard to buy and sell secondhand things in an efficient way so one afternoon while mulling over some ideas at their local pub Patrick and John came up with a potential solution back in technology for eBay users to manage inventory and they found two other guys who were working on a similar problem so they joined up with him moved to San Francisco and called their company octo Matic what automatic did was it made it really easy to kind of manage and to list items for sale on existing platforms things like eBay or you know other marketplaces for for selling some of these items you could use automatic to sort of track your inventory and to upload your items and to manage the listing photos and so basically it was a tool for people who are kept selling significant amounts of stuff online you know and so a software to help those people do that job better and the idea was that kind of that could help us gain kind of one side of the marketplace such that over time we could come and then build you know a better user experience for customers so you guys build this thing and who is the public face of octo Matic because I mean obviously you guys are super smart and talented but you know you were really young right like 18 and 16 years old so were you guys sort of staying in the background and with the other founders that the public face was really the website right the the great line about how on the internet nobody knows that you were college right you know we kind of took full advantage of that but the company must have done pretty well right because I guess just over a year after you had your original idea it's sold for reportedly four five million dollars so it was a strange - all of a sudden at that age you know landed - that kind of money and no you didn't get 5 million yourself yet to divide it up and accept but still you probably monsters and yeah yeast upright walked away with a couple hundred thousand bucks that was probably more money than you'd ever seen in your life was certainly more money than we'd ever seen in our lives yeah it was enough money that it afforded a kind of freedom and really I think just kind of forced it of a kind of reflection that you know had we been or had I been kind of on just the the treadmill of you know you you go to college and get your degree and then it's a first job and so on such that you know I I can certainly imagine sort of a different version of my life in my career where I didn't do some of that thinking until I was much older yeah so I guess this was like right around the time you were at at Harvard John and Patrick you eventually went back to MIT for a while right that's exactly right in the fall of 2009 and I should just preface this by saying both of you would drop out and never return but in that in that brief moment of time were poor John you were Harvard and Patrick you were at MIT is that really this around 2009 is that were the early sort of idea that would become stripe began yeah that's an interesting question because on the one hand so a stripe was the most interesting idea we had come across during the course of automatic in that it was the single hardest thing about developing an internet business was just the the business side I was in the accepting money's had the pain inside yeah it's anything it's it seemed like a really important problem and we thought there should be something really easy focused on developers instant set up so that people started starting accepting money but in the other hand what did we know right we were these two college students yeah and so maybe the financial system had it all figured out and we were these these impetuous youngsters with the wrong ideas and so you're trying to figure out in those early days of starting and company are starting a product are we wrong or is the world wrong so let me understand understand what take us budget 2009 I mean I remember using Amazon and you know buying stuff from Amazon and for me as a customer it was seemed fairly frictionless you know I just hid you know click to buy it and that it would be delivered like a couple days that's exactly it and I think that's part of why it didn't get solved is that as a customer everything seemed fine yeah and then you talk to anyone who had to run a business and in particular an internet business and they would talk your ear off happily about it I mean that the kind of stories they would tell you again often times they tell you it was the single hardest thing about getting their business off the ground because the providers that exist at the time is often through banks they were the gatekeepers they were the people that said yes you can have an online business or or or no you can't and so is a much more important step in that regard and yeah it's funny when we go to investors early on for stripe they would say you know it seems pretty solve you know it's 2009 like you know I think we have this internet payments thing down and they would do some asking around and that's when they got it right so you so if you were starting a business in 2009 when when this idea came to you what I mean and you you want to accept payments let's say you had a business selling oh I don't know you know a homemade peanut butter that you would ship to people it was great it was hard it was it would have been really hard to set up a way to accept payments to your site I mean it's it's hard to imagine that it could have been the case and you know clearly there must be some kind of reasonable answer to this some some you know easy-to-use piece of software something and we just weren't finding it but what we came to realize is that because it was financial that sort of technology companies were very hesitant to go in addresses why why would they be hesitant because you deal with partnerships with financial institutions and regulation and risk controls and making sure that things are sort of done compliantly and it becomes then very complicated to figure out how to offer that service internationally and so the fact that you had two cusps and these multiple sectors and deal with all these kind of different constraints with figuring out a better way to do payments technology companies startups tended and still tend I mean for understandable reasons to kind of shy away from thing from problems that sort of where you have to solve a lot of hard problems in multiple domains yeah and then you know coupled to that was the fact that in PayPal existed yeah and I think for a while back in the early days of PayPal people thought that you know PayPal was gonna solve this it explain for a moment the PayPal thing because I you know I've used PayPal not very often but I've had you know occasions where somebody asks me to PayPal them and I've PayPal them and it seemed pretty easy so what was a problem so the basic issue with PayPal was that it's designed for consumers not for businesses and so if you're building an app if you're building you know a website if you're building a new market play something like this PayPal works ok for sending you know $20 from Joe to Jane yeah where it works much less well is when you want to do this at scale you want to sort of build an automated integration to your website where you're running a business with as PayPal just isn't designed for the business use case it was built for eBay we're kind of one-off sending a hundred dollars manually from this person to that yes and whereas when you're building a business online when you're again integrating this into a website or into an app or something like that you've a quite different set of considerations around how you do is had scale and PayPal had not been designed for that so ok so here's what I don't get you guys were obviously super smart and very good at coding but what made you think that you could solve these big enormous problems like regulation and dealing with banks and developing relationships and credit card companies that you know Google and Apple clearly felt that they could not resolve in large part a healthy dose of the naivete of youth but you know we didn't just leap into us we built the first prototype back in October of 2009 and then we basically spent kind of eight or ten months trying to sort of map out what would actually be required to have this work into this you know any material scale what sorts of people we'd have to hire which sorts of entities we'd have to partner with and you know what that would look like and so we realized well we need to hire you know very senior and experienced partnerships people to make sure that we can get to those first tier relationships in place with banks and it really was apparent to us that and I wouldn't be easy like it was not gonna be possible for it to be some sort of well you know we code furiously for two months we launched this thing and then it's off to the races like from when we started working on at full time we publicly launched was almost two years that's how long it took us to kind of orchestrate all those details that sort of you're describing yeah and but I guess yeah well we got a sense first and if after again that this kind of investigation was yet gonna be hard but it is actually possible so you guys had a couple hundred thousand bucks from the sale of öktem attic and obviously you have the coding chops and the technology chops but you did not have any money how are you able to to get money to to you know fuel the ambitions of this company one of the things that Silicon Valley does well is it probably has the high you know Patrick and I now travel to a decent number of other places and stripe has offices around the world and Dublin London and Singapore in places like this but but I think Silicon Valley is probably the best place in terms of the risk tolerance of the investment capital that's available if we could get people convinced of the opportunity and if we could show people that initial early customer traction and and how much it resonated with the target market they were actually willing to take a bath despite the fact I mean when you look back on it there was a vast amount of uncertainty in every other aspect of the execution between would Patrick and I be able to get visas for Dean of the United States to work here too would we be able to hire too hot with the long term you know financial partnership structure and things like that looked like but people are willing to look past all of those things yeah to the opportunity what I'm what I wonder is when you I mean you had an advantage when you when you started meeting with investors I'm assuming because you had already started and sold a business and a lot of investors love that they love to see that experience but did they ask you were you asked tough questions by potential investors like for example you know you guys are really young how are you gonna manage people or you don't have any connections or involvement in the financial industry or backpacker did you get questions like that surprisingly no I think people are used to that in Silicon Valley I mean by the time people become famous because because the thing they worked on succeeded they tend to be older but I think the mental image have of people who do successful things is like 10 to 20 years maybe even more older than the ages at which they tend to have actually done them right and VCS and investors and just people in general in Silicon Valley I think are sort of unusually sort of attuned to this fact and recognize and realize that sort of hey really significant work not only can be done by people in their twenties but is very commonly done by people in their twenties and so you know I think that's kind of to their great credit and you know we really benefited from it the you know I mean this is not to suggest that investors you know rushed with enthusiasm to invest in stripe most investors said no but the reason was much more reasons were much more because they just thought it was a bad idea rather than the kind of well you know a whole host of reasons it was going to be a developer oriented service rather than going instead of trying to run this big kind of expensive sales and marketing campaign so really many companies in the exactly's already thousands of companies doing something like this as you suggested there were a lot of partnerships that we'd have to navigate and get in place and you know those don't tend to be kind of the Forte of a startup and it wasn't clear to them back then I think viscerally just how early the market kind of still was you know we were sort of starting stripe in the wake of the financial crisis and it's kind of hard to remember this or kind of internalize it now but people were actually fairly pessimistic about technology in some ways back then and that was in part because US investors had really kind of tilted quite skeptical and where technology was going and so I think you know the kind of the bear case on stripe was in part this bear case on technology more broadly where well maybe we've already done all the stuff we're going to do when we come back there John and Patrick stayed bullish on stripe and how they finally got it off the ground stay with us you're listening to how I built this from NPR [Music] hey welcome back to how I built this from NPR and guy Roz so it's 2010 patrick has dropped out of MIT john has dropped out of Harvard and their parents are not freaking out about this by the way the brothers are working full-time on stripe and they start to look around for investors and a lot of investors are saying no but finally John Patrick catch a lucky break when they managed to get a meeting with a pretty big player in Silicon Valley we had a meeting with Peter Thiel and sort of you know just as in this conversation we sort of told him structurally what we saw as being all the kind of major flaws in PayPal you know we were looking back on it I said of cringe little - you know how impolite a guest I must have been exactly and so you know at a great length and sort of belabor the point about sort of how they kind of had things wrong way but Peter being such a sort of you know an inveterate contrarian was quite sympathetic to this case and decided on the spot to make you know a fairly yeah material investment of $200,000 so so what did Peter TLC and stripe like was it just easy to use I mean was it the kind of thing where a software developer would be like oh my god somebody has finally figured this thing out I I think many of the developers were just really glad that someone was finally paying attention to them at all now as it happened we paid obsessive attention to them and we were really building for that audience but the baseline that people were working with was very low it was not competitive I think what changed and wash we were fortunate to be a part of was the fact that now four internet businesses payments is actually part of the strategy that matters it's part of the product experience and so basically I think this used to be a fairly tactical vendor decision for the business where it was just something that needs to be taken care of and there was only downside really you could make a bad choice but you couldn't make a great choice for is now as we've seen with companies like Amazon like lyft like insta cars they can actually win based on their product experience and that's new so ok so for people who are non-technical non coders and I will count myself among them explain how this works basically your lyft and I take a lyft and I pay the driver I just click pay and I've left or you guys I guess have my credit card and so you have to communicate with my credit card company to make sure that they are charging me so then my bank account will be able to pay the credit card company later presumably you also have to pay the credit card company right like they're taking a cut of your money too that's exactly right so what's happening underneath the hood when you use any business powered by stripe is you know you probably type in your credit card you probably only type it in once and then it's saved with your profile for any time use it in future that is securely sent directly to stripe so it's not you know kissing or something stored on other servers and then but when a business wants to actually you know accept money and charge your credit cards and you know over time it's now more than just credit cards as bank transfers and different international payment methods and things like this but the business who wants to charge your credit cards they say hey I'd like to charge this card $20 and and we put money in their bank account and we have handle everything that goes on between that instruction and the money arriving in their bank account it's actually pretty complex what goes on under the hood but again our aim is that people do not start businesses so they could deal with the minutiae of the financial system right they'd start businesses because they have a vision and they have a product that they want to get out there into the world and we want to get them back to doing that anything that does not get them jumping out of bed in the morning you know we should be able to take off their place right and out of the technical that was kind of a yes so my understanding is that it was basically seven lines of code which I guess from a coding standpoint is very simple elegant and a developer could just plug that in to the application or site they were developing and then that was it that's pretty much it we had lots of stories of people integrating payments in an afternoon or an evening and then launching their business the next day and I just worked consistently as a big break from what if you fail before and once you started to gain momentum and you launched and I guess you lot you launched publicly in 2011 right that's right um how did you convince companies to to trust this to work with you who was your first big customer client well because we are serving high potential companies and startups and fast growing companies we grew with our customers and so back in the early in the very earliest days yeah those companies were pretty small but some of them start to you know become pretty big like lift and Shopify and so on became customers of strife and of course lift and Shopify have now become you know have very successful companies in their own right and how did you get them to work with you to just meet meet the people who were working at those companies and and you just developed a well yes we sort of got to know those people but I think more fundamentally and importantly than Bosch we enabled product experiences that they wanted to have so in lifts case for example they wanted to not just charge their customers but they wanted to pay their drivers and there was no product that enabled a really good driver payment experience and so we've kind of co-evolved with them to enable the best end user experience and and your revenue stream was a percentage of every transaction that was that that was going to and that is the way that that you get paid yeah we really wanted kind of clarity in the alignment of interests where we would only make more money when the businesses we served made more money and there's like I think it's like 2.9 percent or something transaction fee right transactions that right that's right what did anybody try to stop you or make life difficult for you banks or regulators because you're dealing with intricate financial regulations and I mean and big banks presumably have a big interest in this as could be a revenue stream for them like did were there people who try to or was it just once you started you just the momentum was the wind was behind you well in this department we really try to try to approach things differently to I think how technology companies often tend to technology companies I think often have a sort of go it alone mentality will build it all in-house we'll do it all ourselves we can do things better than ever in the outside world whereas we thought that stripe would only be possible and it would only be possible to do it well if we partnered closely with people who had deep expertise and experience and industries that we ourselves were less familiar with and so from the very beginning even before we launched we partnered closely with banks and now we work with banks in many different countries and not just banks but sort of other financial institutions besides but we really wanted to build a stripe instead of a you know multi-decade thing yeah and if we were gonna go and do it that way we we really had to do it right so as you started to really you know launch and develop and get more and more attention why didn't the competitors come out from the woodwork why didn't like PayPal or these other transaction companies Square and stuff say we're just gonna do what they do did they try well what we were doing didn't look that important back then it wasn't the case that sort of we immediately or what we were doing immediately looked like it was obviously working and obviously of major significance we were back then in the eyes of others sort of working with all these inconsequential little companies and making their lives a bit easier but well was this mobile payment thing actually going to amount to much in aggregate were were there actually that many developers that would be starting these successful companies I mean again it kind of gets back to this pessimism around technology that kind of existed and prevailed around 2009/2010 and so on and this is one of the great facts about our industry is that you cannot turn money into great products as a kind of mechanical operation if it were possible there would be many more great iPhone competitors yeah Facebook would have been long since he clipped by MySpace or Yahoo or really good to use right and the intricacies of good product of good design of good architecture those can't be trivially replicated I mean I mean essentially your competitive advantage was was you guys I think it's an an amorphous combination for any of these products and I don't mean to single stripe out for any great product some amorphous combination of sort of the ethos and the culture and the people and sort of the work style and kind of a fingertip sense for the priorities and all these things that are just like very hard to copy I mean it's the sort of a continuum where at one end you know you're you're manufacturing steel and at the other end you're you know you're manufacturing novels and in steel manufacturing sure you can turn capital into more better cheaper steel and at the other end it's very hard to know how you turn the money into kind of better writing and software is is somewhere in between and I think this is kind of constantly the challenge for people looking to analyze and make predictions in the industry where again Google should have beaten Facebook's yeah Google had every advantage against Facebook they had you know more people more money more distribution more brand recognition more of kind of any of the obvious inputs and yet somehow there was something missing when you think of this number last year nine point two billion dollar valuation does that mean anything to you I mean is it abstract do you think man I'm rich or doesn't even cross your mind must at some level right it's been my experience that people pay a huge amount of attention to the headline numbers of Silicon Valley companies and so you know stripe is a company that's been valued in in fundraising at night you know nine point two billion dollars or or what have you there is an assumption baked in that stripe continues to execute very strongly and so it would be a very dangerous mode to slip into becoming rearward looking and looking at everything that has happened today is because the much more relevant fact is lost we release in 2018 what we release in 28:19 what what stripes global expansion looks like and things like that you don't have a valuable company unless the company continues to execute it's very dynamic it's a very careful way of saying hey I could lose this all at any moment yeah what how much of the success of this company do you tribute to your skill and your you know your intelligence how much to luck I think the question is less about you know how much can be attributed to my skill and intelligence and instead to the skill intelligence of the hundreds of people who've gotten the stripe to where it is and I guess I would say that skill and intelligence and especially most importantly intense application and hard work I think all those things are necessary I think had they not been there had there not been so many people who just came up with so many smart ways of doing things and you in many cases toils at such lengths there's not a chance not a sliver of a chance that we would be here but I also think that the luck was required to again groups of people who are smarter and harder working than us who just didn't have the same good fortune you are still both of you guys are still so young I mean you know you're at a point your life where that's so every day but Pointer life where lots of people are just starting out you know at the same age so yeah when did you guys know that this was huge I mean you know it was going from this idea that you have in Cambridge Massachusetts to raising two million to being valued at 20 and then a hundred and a billion and then today more almost 10 billion when did you did you ever have a moment where the two of you sat back and said wow what we built I've never really been time for that home and there's nothing like a young company to every morning remind you that there's so much left to be done so much that's not yet working the way it should be I mean it's really quite visceral you wake up in the morning and there are 20 emails in your inbox that are sort of somehow all related to things that you're doing badly or wrongly there's never a moment when it feels successful and there's a quote that I kind of often think about from Greg Lemonds saying of course that the cycle is yeah it never gets easier you just go faster and I used to kind of cycle quite a bit and there's a lot of sort of painful truth to that where as you cycle more as you practice more as you get fitter as you get faster as your form gets better sure you start cycling faster your time is get better with the experience of being on the bike never gets easier the pain that you feel on the first bike ride that's the same pain that you're going to feel on your 500th bike ride you'll just be going much faster on the 500th bike ride and it kind of feels like that in the startup where every day now the problems and challenges and you know visceral pain is just as acute as when we were starting out the problem is just of a different form it's it's this kind of relentless process of trying to shift what it is that exists and what we've collectively managed to create so far into what we all set out to create in the first place and we still have quite a ways to go there that's Patrick and John Collison founders of stripe in 2017 John Collison was described as the youngest self-made billionaire on earth and I know you heard us talking about their valuation as being like nine or ten billion dollars well remember we did that interview back in 2018 today just two years later stripe is valued at 35 billion dollars [Music] you [Music] you