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This tech founder wants to get rid of the online checkout process entirely

Stripe buy embedded image
Source: Stripe

Square’s (SQ) IPO caused some serious whiplash on Wall Street. After pricing below its proposed $11-$13 range at $9 a share, it jumped more than 45% in its first day of trading last Thursday and closed the week at $12.85 a share.

Among other so-called unicorns that have gotten buzz is Stripe, an as-yet private startup that also processes payments. At first glance, Stripe may seem like Square’s less glamorous stepsister. But in reality, they compete in different markets. Whereas Square began with the mission to make it possible and easy for all businesses to accept credit cards, Stripe has a specific focus on processing online payments, with an emphasis on mobile.

Stripe confirmed its latest valuation of $5 billion. (Square was valued at $6 billion before its IPO, but since going public, its market cap is around $3.9 billion.) And though John Collison, president and co-founder of Stripe, did not comment directly on Square’s IPO, he told Yahoo Finance that the two companies are “quite different businesses.” While Square is “targeting offline merchants like coffee shops, hairdressers and other merchants of the sort, Stripe is targeting technology companies,” Collison said.

Stripe was co-founded by brothers John and Patrick Collison and launched in 2010. Over the last five years it has attracted capital from the likes of Elon Musk, Peter Thiel, Max Levchin (co-founder of PayPal) and Marc Andreessen. It has also received funding from Visa and American Express.

Like many startups, Stripe has garnered its share of headlines but not much headway in the market. According to software solutions firm Maruti Tech, Paypal has 91% market share of the online payment processing space while Stripe has 3%. In 2013, PayPal acquired Braintree, the other leading player in the mobile payment technology space.

Collison acknowledged that his company, based in San Francisco, is still in growth mode. “Stripe is quite small and we have a lot of ground left to cover because commerce is still moving online at an incredible pace. We want to power the next 20 years of payment,” he said.

According to digital research firm eMarketer, e-commerce accounted for 5.9% of the global retail market in 2014. It forecasts that by 2018, that share will increase to 8.8%. And Collison is building his business on the premise that e-commerce will eventually reign supreme.

Upstarts like Kickstarter, Warby Parker and Shopify are among Stripe’s clients. Stripe also powers the technology within Lyft’s payment system (Braintree created Uber’s payment system).

And Stripe is also integrating seamlessly into native buying experiences. Rather than redirecting users to another website, Stripe enables companies to embed a buy button inside a tweet, thus allowing you to complete a transaction without ever leaving an app.

Source: Stripe, Twitter
Source: Stripe, Twitter

Collison said he’s essentially trying to get rid of the online checkout entirely. “Rather than entering in all of the details and putting in duplicative efforts, we want these technology companies to embrace purchasing on-platform, which does really well on mobile.”

Though Collison wouldn’t comment on Stripe’s plans for an IPO, Sean Madnani, senior managing director at investment firm Guggenheim Partners said, “We are likely to see more IPOs, but at lower valuations. Private capital for some companies is expected to dry up.” Perhaps the window of opportunity will close faster than it opened.

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