Thread
Stripe and YCombinator, the Mob Bosses of Silicon Valley, a thread:
For those of you who donât know me, I run a payments company called Bolt doing 1-click checkout for the internet.
Today, nearly 8 years in, weâre a successful company with 600 employees, billions in GMV, and growing rapidly.
But the first 7 years were brutal.
Today, nearly 8 years in, weâre a successful company with 600 employees, billions in GMV, and growing rapidly.
But the first 7 years were brutal.
Blow after blow, I couldnât understand why VCs wouldnât invest, recruits wouldnât join, and the media wouldnât cover us.
Having a deeper understanding of how Silicon Valley works, Iâve now put the pieces together.
Read this top to bottom, and I will lay it all out for you:
Having a deeper understanding of how Silicon Valley works, Iâve now put the pieces together.
Read this top to bottom, and I will lay it all out for you:
At the highest level: two forces have the most power in Silicon Valley.
And like⊠tenfold more than anyone else.
Their names: Stripe and YCombinator.
The kicker â Their power is in how they work together.
Let me explain:
And like⊠tenfold more than anyone else.
Their names: Stripe and YCombinator.
The kicker â Their power is in how they work together.
Let me explain:
Stripe is the darling child of Silicon Valley.
Early to YC (YCombinator), Stripe made payment processing APIs easy and signed up all their YC batchmates to use their product.
One of them blew up to become Lyft, going from zero to billions in payment processing.
Early to YC (YCombinator), Stripe made payment processing APIs easy and signed up all their YC batchmates to use their product.
One of them blew up to become Lyft, going from zero to billions in payment processing.
The âofficial payment processor for YCâ, Stripe became a HOT company.
Sequoia, the most powerful VC firm in the world, went all-in.
Their position today is upwards of $20-$30B in Stripe stock.
Sequoia, the most powerful VC firm in the world, went all-in.
Their position today is upwards of $20-$30B in Stripe stock.
Three forces combined quickly:
1/ The most powerful VC firm in the world.
2/ The most powerful startup accelerator in the world.
3/ The most powerful startup in the world, with the help of #1 and #2.
1/ The most powerful VC firm in the world.
2/ The most powerful startup accelerator in the world.
3/ The most powerful startup in the world, with the help of #1 and #2.
But nothing seems too wrong yet?
Ok, so now hereâs where my journey begins. đ„ł
Ok, so now hereâs where my journey begins. đ„ł
~~Rejection from YCombinator~~
We had so much going for us: product, team, traction.
We were undoubtedly onto something.
I had even networked my way into YCâs leaders who suggested that I apply to YC.
We submitted all our company paperwork only to⊠get rejected.
We had so much going for us: product, team, traction.
We were undoubtedly onto something.
I had even networked my way into YCâs leaders who suggested that I apply to YC.
We submitted all our company paperwork only to⊠get rejected.
Next, we were âinvitedâ to apply again to YCombinator and submit updates on our business.
I politely declined that invitation. â
New to Silicon Valley, I thought every great company needed to go through YC.
Conclusion: I would make it on my own.
I politely declined that invitation. â
New to Silicon Valley, I thought every great company needed to go through YC.
Conclusion: I would make it on my own.
~~Inability to raise money from established investors~~
So⊠Iâm a decent fundraiser đ
Iâve raised over $1B to date, and have even written a book on it.
How did I learn?
Countless rejections from every âtier 1 silicon valley firmâ
So⊠Iâm a decent fundraiser đ
Iâve raised over $1B to date, and have even written a book on it.
How did I learn?
Countless rejections from every âtier 1 silicon valley firmâ
Let me explain.
I had a game-changing product, traction, and a world-class team out of FB/Google/Twitter/Amazon. đ„đ„đ„
Meetings would go phenomenally well.
VCs would get excited, and many even commit to term sheets.
Then, mysteriously, theyâd back away.
I had a game-changing product, traction, and a world-class team out of FB/Google/Twitter/Amazon. đ„đ„đ„
Meetings would go phenomenally well.
VCs would get excited, and many even commit to term sheets.
Then, mysteriously, theyâd back away.
To survive, I had to convince up and coming VCs to take the plunge with Bolt.
Tribe Capital, Activant Capital, Westcap Group. đ
Branded firms today, they were brand new at the time.
My realizations were twofold:
Tribe Capital, Activant Capital, Westcap Group. đ
Branded firms today, they were brand new at the time.
My realizations were twofold:
1/ Stripe had deliberately taken checks from nearly all the top-tier Silicon Valley investors in order to block new companies
IN FACT, many of their investors had told me as much, and commented on it as a great strategy!
IN FACT, many of their investors had told me as much, and commented on it as a great strategy!
The pro-startup payment processor was on a mission to make sure no other payments company would ever be built in Silicon Valley.
The result? Every single one dead đ
Their only competitors rose internationally: Adyen, Rapyd, Checkout .com, etc.
The result? Every single one dead đ
Their only competitors rose internationally: Adyen, Rapyd, Checkout .com, etc.
2/ Any time investors would backchannel us, they would get scared away.
Stripe, YC, and associates knew just what to say to the investors to get them to back away.
Intentionally or Unintentionally, the forces at be made it 10X harder for us to fundraise.
Stripe, YC, and associates knew just what to say to the investors to get them to back away.
Intentionally or Unintentionally, the forces at be made it 10X harder for us to fundraise.
Pretty bad, but not too bad yet.
⊠It gets worse.
⊠It gets worse.
~~Blocking the media~~
Stripe and YC effectively co-run the most important media asset in Silicon Valley: Hacker News.
Anyone technical in Silicon Valley, myself included, reads it almost daily.
The result: a monopoly on technical eyeballs.
Stripe and YC effectively co-run the most important media asset in Silicon Valley: Hacker News.
Anyone technical in Silicon Valley, myself included, reads it almost daily.
The result: a monopoly on technical eyeballs.
The readers know: any time Stripe comes out with a new product, itâs #1 on the site đ€Ż
Getting a #1 ranking is INCREDIBLY difficult and generates millions of views.
Somehow their posts always make it up there.
Getting a #1 ranking is INCREDIBLY difficult and generates millions of views.
Somehow their posts always make it up there.
Stripe knows this game all too well and is all-in on media domination.
In fact, they self-identify as a publisher.
Lookup Stripe Publishing.
In fact, they self-identify as a publisher.
Lookup Stripe Publishing.
We had several major product announcements that were game-changers at the time.
> Zero fraud guarantees.
> 1 click checkout.
Both had organically made it up to #1 on Hacker News with 100s of upvotes. âŹïž
Within the hour, Stripe posted, gotten theirs to #1, and ours was gone.
> Zero fraud guarantees.
> 1 click checkout.
Both had organically made it up to #1 on Hacker News with 100s of upvotes. âŹïž
Within the hour, Stripe posted, gotten theirs to #1, and ours was gone.
We had put incredible work into highly technical blog posts to educate the community on how we did payments differently.
The post would rise, then disappear.
It was crystal CLEAR to me: Bolt was not welcome on Hacker News
The post would rise, then disappear.
It was crystal CLEAR to me: Bolt was not welcome on Hacker News
WHO WANTS PROOF?
On April 18, 2018, we posted this:
news.ycombinator.com/item?id=16870692
How Bolt does fraud detection better
(linked to: www.bolt.com/blog/better-fraud-detection-with-bolt/)
An ~hour later, this showed up:
news.ycombinator.com/item?id=16869290
Improved fraud prevention with Radar 2.0
Ours disappeared.
On April 18, 2018, we posted this:
news.ycombinator.com/item?id=16870692
How Bolt does fraud detection better
(linked to: www.bolt.com/blog/better-fraud-detection-with-bolt/)
An ~hour later, this showed up:
news.ycombinator.com/item?id=16869290
Improved fraud prevention with Radar 2.0
Ours disappeared.
~~The Nuke~~
5 yrs into Bolt, pouring my blood and sweat into this business, we had finally managed to raise a Series B and C round.
Things were starting to pick up. âïž
Then one day, I woke up to find that a newly launched company, with near zero traction had raised $100M.
5 yrs into Bolt, pouring my blood and sweat into this business, we had finally managed to raise a Series B and C round.
Things were starting to pick up. âïž
Then one day, I woke up to find that a newly launched company, with near zero traction had raised $100M.
From who? Stripe.
At what valuation?
Drumroll⊠đ„đ„đ„
More or less, the same as ours.
At what valuation?
Drumroll⊠đ„đ„đ„
More or less, the same as ours.
Nearly overnight, I had a new competitor with roughly the SAME VALUATION and MORE CAPITAL in the bank than us.
They did their deal with the Mob, allowing them to own a considerable amount of equity in their company.
Plus a commitment to pay their payment fees.
They did their deal with the Mob, allowing them to own a considerable amount of equity in their company.
Plus a commitment to pay their payment fees.
And itâs not just us: I believe theyâve done this to many other companies.
Including many of my friends.
Founders are unable to stand up to them, but the community is starting to catch on. See some of the comments in this thread: news.ycombinator.com/item?id=29387264
Including many of my friends.
Founders are unable to stand up to them, but the community is starting to catch on. See some of the comments in this thread: news.ycombinator.com/item?id=29387264
~~Isnât this just good competition?~~
Absolutely, yes.
And to be clear, I welcome competition.
But hereâs the thing⊠the ONE thing I canât stand is a facade.
Stripe wants you to think theyâre the darling, pro-startup, unicorn company who everyone loves.
Absolutely, yes.
And to be clear, I welcome competition.
But hereâs the thing⊠the ONE thing I canât stand is a facade.
Stripe wants you to think theyâre the darling, pro-startup, unicorn company who everyone loves.
The reality⊠if you stand in their way, they will do more than compete with you head on. đł
They will use every power move imaginable.
Blocking you from capital, media, talent.
And funding competitors just to get back at you.
They will use every power move imaginable.
Blocking you from capital, media, talent.
And funding competitors just to get back at you.
~~So why are they the Mob Bosses~~
Mob Bosses control resources in a particular geography.
If you donât pay them their fees, you donât get access.
Even if theyâre not doing anything illegal, thatâs exactly how Stripe and YCombinator work.
Mob Bosses control resources in a particular geography.
If you donât pay them their fees, you donât get access.
Even if theyâre not doing anything illegal, thatâs exactly how Stripe and YCombinator work.
2%-3% on your processing.
7% on your cap table.
$400k-$500k as an MFN on your earliest valuation.
7% on your cap table.
$400k-$500k as an MFN on your earliest valuation.
Pay their fees and get ACCESS to their territory.
Pay YC their take, and you now can sell your products to YC companies.
Donât pay their take, and the YC company that does gets all the YC companies as customers.
They call it âempowering your batchâ
I call it The Mob. đ„
Pay YC their take, and you now can sell your products to YC companies.
Donât pay their take, and the YC company that does gets all the YC companies as customers.
They call it âempowering your batchâ
I call it The Mob. đ„
On a more positive note, Stripe and YC have done good things for Silicon Valley.
Theyâve provided strong payment APIs to developers whoâve needed it.
And important guidance to founders looking to make it in tech.
Theyâve provided strong payment APIs to developers whoâve needed it.
And important guidance to founders looking to make it in tech.
But like anyone else with tooooo much power.
Power corrupts.
If youâre in a tangential industry to Stripe, donât be fooled.
Keep your eyes open.
Power corrupts.
If youâre in a tangential industry to Stripe, donât be fooled.
Keep your eyes open.
Iâm lucky enough to be in a position where I can write this.
I donât have the big VCs on my cap table.
I didnât go through YC.
My company has broken through.
I donât have the big VCs on my cap table.
I didnât go through YC.
My company has broken through.
But others arenât as lucky.
So, thereâs one reason I wrote this:
To expose new founders to the truth of Silicon Valley.
So, thereâs one reason I wrote this:
To expose new founders to the truth of Silicon Valley.
At Bolt, weâre up against Amazon â at least Bezos is clear to the world about his intentions.
And I'll be clear about my intentions too: I plan to build an epic company culture, and compete.
Stripe and YC founders â I have nothing against you as people.
Letâs just do better.
And I'll be clear about my intentions too: I plan to build an epic company culture, and compete.
Stripe and YC founders â I have nothing against you as people.
Letâs just do better.
*Correction: Lyft was not a YC company
*Correction 2: the last tweet is not directed towards founders in YC, I mean the founders/leaders of YC the institution
Private msgs from other founders afraid to post because of The Mob:
âI just wanted to say that I loved your tweet. you are 100% rightâ - fintech CEO
âReally appreciated this thread dude. Stripe did the same thing with a competitor they incubated to take us on.â - fintech CEO
âI just wanted to say that I loved your tweet. you are 100% rightâ - fintech CEO
âReally appreciated this thread dude. Stripe did the same thing with a competitor they incubated to take us on.â - fintech CEO
âI felt similar things⊠Have never written about it because I still want to raise from top vcs for my next ventureâŠâ - fintech CEO
âMuch respect. You said the thing everyone was afraid to sayâ - fintech VC
âMuch respect. You said the thing everyone was afraid to sayâ - fintech VC
Fintech VC convo today â>
âI went to make an investment in a subscriptions business years back. Another investor intro'd me to Patrick Collison as a âbackchannel referenceâ.
Within minutes of the email intro, Patrick calls my office landline (no clue how how he got my #)...
âI went to make an investment in a subscriptions business years back. Another investor intro'd me to Patrick Collison as a âbackchannel referenceâ.
Within minutes of the email intro, Patrick calls my office landline (no clue how how he got my #)...
...and says âHey this is Patrick Collison. Do not invest in them.â [deadpan, silence]
VC: âWhy?â
Patrick: âWe are building subscriptions and going to kill them.ââ [deadpan, again]
⊠Iâm 100% sure this is what happened to me about 100 times.
VC: âWhy?â
Patrick: âWe are building subscriptions and going to kill them.ââ [deadpan, again]
⊠Iâm 100% sure this is what happened to me about 100 times.
Separate Fintech VC convo today â>
âI know the VC group within Stripe well.
They told me they did not want to do the Fast deal given they had effectively zero traction.
But the âpowers at beâ overruled them.â
âI know the VC group within Stripe well.
They told me they did not want to do the Fast deal given they had effectively zero traction.
But the âpowers at beâ overruled them.â
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