Money Stuff: The Podcast – Episode Featuring John Collison

Release Date: October 18, 2024
Host: Matt Levine & Katie Greifeld
Guest: John Collison, Co-founder and President of Stripe

Introduction to the Episode

In this special episode of Money Stuff: The Podcast, hosted by Bloomberg’s Matt Levine and Katie Greifeld, the spotlight shines on John Collison, the co-founder and President of Stripe. Known as tech industry celebrities alongside his brother Patrick Collison, John offers deep insights into Stripe’s innovative approach to financial services, the future of private companies, and the evolving landscape of cryptocurrency.

Stripe's Revolutionary Approach to Financial Services

Self-Funding vs. Traditional Venture Capital

John Collison opened the discussion by highlighting how Stripe facilitates early-stage companies to monetize effectively, reducing their dependence on traditional debt and equity financing. This self-funding mechanism is transforming the startup ecosystem.

[06:35] John Collison: "Stripe allows early stage companies to monetize so efficiently that there's less need for debt and equity in the world because companies can self fund. Like you're putting VCs out of business."

Matt Levine elaborated on this by explaining Stripe’s role in enabling businesses to grow organically without the typical pressures from venture capital milestones.

[05:20] Matt Levine: "If you think about potential sources of funding for a business... Stripe is kind of the most directly doing this, where we're making it easier for businesses to self fund their growth."

Programmatic Lending and Cash Flow-Based Financing

Stripes innovative lending solutions leverage machine learning models to assess a company's cash flow, enabling programmatic lending without traditional credit checks.

[07:59] Matt Levine: "We're looking at the stream of cash flows. Is it a healthy, reliable stream of cash flows that can support some debt?"

This approach not only simplifies the lending process but also opens up opportunities for startups that might struggle to secure traditional bank loans.

Stripe Atlas: Democratizing Incorporation

Stripe Atlas allows entrepreneurs worldwide to establish a U.S. Delaware corporation effortlessly, making their ventures more attractive to investors.

[08:02] Matt Levine: "Stripe Atlas... lets companies where the founders might be in Israel or Singapore create a U.S. Delaware company. And that makes it much more investable."

This product has significantly lowered the barriers for international founders, fostering a more inclusive global startup ecosystem.

Navigating Private Company Strategies

Deliberate Approach to IPOs

John discussed Stripe's cautious stance on going public, emphasizing the importance of timing and business maturity over adhering to market trends.

[34:05] Matt Levine: "We don't think companies should sleepwalk into going public. We think they should be deliberate about it."

This strategy reflects Stripe’s focus on sustainable growth and long-term value creation over immediate valuation gains.

Tender Offers and Private Market Liquidity

Stripe has implemented tender offers to provide liquidity to its private shareholders, allowing employees and investors to access their shares without the company going public.

[36:19] Matt Levine: "We think the tender every year is a nice solution... It has worked quite nicely for us so far."

This method maintains Stripe's private status while offering flexibility to its stakeholders, setting a precedent for other private companies.

Impact on Traditional Public Markets

Katie raised concerns about high-growth companies staying private, potentially limiting access to ordinary investors.

[37:35] Katie Greifeld: "Do you worry at all about that from a systemic perspective that you're depriving American retirement savers of access to Stripe?"

Matt reassured that Stripe’s current investor base, primarily composed of reputable VC funds and institutional investors, aligns with the company’s growth objectives without negatively impacting public markets.

[38:55] Matt Levine: "Most of the non-employee ownership is through essentially VC funds and the underlying VC fund ownership... we feel quite good about making money for [our] LP base."

Crypto: The Double-Edged Sword in Payments

Stablecoins and Legitimate Uses

John brought up the persistent association of crypto with speculative activities but emphasized Stripe’s commitment to leveraging crypto for genuine payment solutions.

[27:19] Matt Levine: "What you specifically have now with stablecoins is you have firstly something that's value doesn't change... they're fully backed by short-term treasuries."

Stripe's integration of stablecoins like USDC into its platform aims to provide scalable and reliable payment options, especially beneficial for regions with unstable local currencies.

Balancing Innovation with Regulation

Matt acknowledged the challenges in the crypto space, particularly balancing innovation with regulatory compliance.

[30:58] Matt Levine: "All the serious grown-up crypto players today... they are subject to the FinCEN travel rule, they are KYCC'ing the actors."

This ensures that Stripe’s crypto solutions adhere to legal standards, mitigating risks associated with financial crimes.

Future Prospects of Crypto in Payments

John inquired about Matt’s long-term views on crypto's role in the financial ecosystem.

[31:59] Matt Levine: "I don't think it's a singular future... You cannot use the existence of the slots in the Vegas casino to write off the work crypto."

Matt posited that while speculative aspects of crypto may wane, the foundational technologies like stablecoins have enduring value, especially in underbanked regions.

Reflections on Financial Systems and Investment Banking

Stripe vs. Traditional Investment Banks

The conversation delved into how Stripe positions itself in relation to traditional investment banks, with Matt drawing parallels and distinctions.

[09:00] Matt Levine: "Stripe's scale and revenue are actually pretty decent proxies for the value Stripe is providing in the world."

Unlike investment banks that rely on extensive human resources, Stripe leverages technology to meet the underserved needs in small-scale lending and incorporation services.

Value Creation and Market Competition

Matt emphasized that Stripe's success is a testament to providing genuine value to customers within a competitive market.

[09:00] Matt Levine: "If customers are choosing you and paying you money for a service, it's because you're providing something of value that you can't get elsewhere."

This customer-centric approach ensures that Stripe remains relevant and indispensable in the financial services landscape.

Personal Passions and Side Ventures

Aviation and Systems Optimization

Away from the core business discussion, Matt shared his passion for aviation, drawing parallels between flying and systems optimization.

[51:00] Matt Levine: "Aviation safety is generally talked about correctly as one of the best examples of process optimization over the last five decades."

His ownership of a general aviation airport illustrates his commitment to refining complex systems, much like Stripe’s approach to payments.

Conclusion and Final Thoughts

John Collison and the hosts wrapped up the episode with reflections on Stripe’s journey, the importance of deliberate growth strategies, and the potential futures of financial systems intertwined with emerging technologies like crypto.

[44:35] Matt Levine: "Have a good business that's growing and is profitable... That's the secret to good investor relations."

The episode provided a comprehensive look into how Stripe is reshaping financial services, balancing innovation with regulation, and maintaining its private status to foster sustainable growth.

Notable Quotes with Timestamps

• John Collison [06:35]: "Stripe allows early stage companies to monetize so efficiently that there's less need for debt and equity in the world because companies can self fund. Like you're putting VCs out of business."

• Matt Levine [05:20]: "If you think about potential sources of funding for a business... Stripe is kind of the most directly doing this, where we're making it easier for businesses to self fund their growth."

• Matt Levine [09:00]: "Stripe's scale and revenue are actually pretty decent proxies for the value Stripe is providing in the world."

• Matt Levine [27:19]: "What you specifically have now with stablecoins is you have firstly something that's value doesn't change... they're fully backed by short-term treasuries."

• Matt Levine [44:35]: "Have a good business that's growing and is profitable... That's the secret to good investor relations."

Final Remarks

This episode of Money Stuff: The Podcast offers invaluable insights into Stripe’s strategic maneuvers within the financial services sector, its stance on public versus private growth, and its foray into the crypto space. John Collison’s perspectives provide listeners with a deeper understanding of how Stripe is not just a payments company but a pivotal player in the evolving financial ecosystem.

For more insightful discussions and financial analyses, subscribe to the Money Stuff newsletter on Bloomberg.com or catch John Collison on Bloomberg TV's Open Interest from 9 to 11 am Eastern.