Stripe: constructing an empire using a thousand-year framework

đź’ˇJC's Newsletter #90

Dear friends, 

In JC’s Newsletter, I share the articles, documentaries and books that I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate. 

I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those. 

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đź’ˇMust-read

👉Stripe: Thinking Like a Civilization (Read Generalist)  (Bring the Donuts Newsletter)  (Stratechery)

Product strategy & international:

  • Myriad of product offerings

Stripe has been great at expanding their offering:

  • Generally speaking, products that drive more payments — Checkout, Billing, Terminal — are free, while products that help Stripe customers save money — whether that be through compliance costs (Tax), fraud prevention (Radar), analysis (Sigma) — cost money. What is common to everything, though, is that it is built on Payments, Stripe’s original product.

  • It’s clear that Stripe has built a foundation for continued product scale. The company launched two products in its first five years; it has launched nine in the last five, with time left on the clock.

  • While Atlas supports the mission to grow the GDP of the internet, and builds admirable rapport with the founders and engineers the company serves, it has also operated as an advance guard for geographical expansion. As things stand, Stripe payments is available in 44 countries — impressive, but far from universal. Atlas, meanwhile, is available in 140.

I like how they used Atlas to expand their international footprint and decide where to invest. 

Margin expansion as mille-feuille:

  • Because payment processing is (mostly) a commodity, there is significant pricing pressure on companies in the space.

  • Much of the product strategy seems to be to protect this part of the business, increase margin via bundling, differentiate through additional features, and increase stickiness by infiltrating multiple elements of an organization’s finances.

  • Payments: 2.9% + 30c per transaction

  • Connect: $2 per user / 0.25% + 25¢ per payout

  • Atlas: $500

  • Radar: 5c per transaction

  • Sigma: 1.4c - 2c per charge / $0-$100+ per month

  • Billing: 0.5 - 0.8% on recurring charges

  • Issuing: 10c virtual card/ $3 per physical card/ 0.2% + $0.20 per transaction

  • Terminal: 2.7% + 5¢ per transaction

  • Tax: 0.4 - 0.5% per transaction

Interesting how Stripe starts by a relatively low margin business and adds new services to increase the margin, hence the LTV of a customer. 

  • To encourage small customers to incorporate Radar off-the-bat, Stripe waives the fee for companies not on a custom plan. You can imagine how this applies across other lines, with wiggle-room in one area used to convert customers in another.

That is why we offer Alan Mind with a discount to Alan insured companies. 

Understanding many roles:

  • Patrick also does rotations with different teams to better understand frontline work:

    • One of the cool things he did, too, was he would do a quarterly rotation with a random part of the organization and work as a team member on that part of the org as a grunt. So he did a sales rotation, he did an engineering rotation, marketing, where he was just the grunt on those teams doing a small project.

I really like that topic of going deep. 

Thinking long-term:

  • We talk a lot about building multi-decade abstractions. I personally like to think 10 to 30 years to get out of the three- to five-year mode, but generally here people do say “multi-decade” a lot.

I really like spending time thinking about what Alan would be in 10 years.

Culture:

  • Writing-first

One of our leadership principles :) 

  • Engineers are expected to be talking with customers as well.

Very important!

Balancing hyper-growth and well-being:

  • Though virtually every former and current employee I spoke to seemed, extremely, genuinely thrilled to be working at Stripe, this was a subtle leitmotif: this is a hard place to work.

  • Working nights and weekends seems to be a common expectation and the most frequent complaint on the company’s Glassdoor page is the lack of work/life balance. One poster remarked:

    • There is an unsustainable workload and the work pressure on individuals and teams is unreasonable. There is a common feeling of burnout in the company, with workload only increasing since Covid.

I see similar patterns in many companies. It is hard to cut the signal from the noise, but it seems important to a) be conscious that it is hard to build fast growing companies, b) we should invest intentionally on making it easier for Alaners. It is not because it is hard that we should not take real care. 

M&A:

  • Stripe has made 11 acquisitions to date.

  • Many of these purchases seem to have been rolled into internal product development.

  • The company has also used M&A to expand geographically.

  • In 2019, the company announced the purchase of Touchtech, a European business that allowed Stripe to comply with incoming regional regulations.

Interesting benchmark in terms of M&A.


🏯 Building a company

👉Good Product Managers, Great Product Managers (Linkedin by Shreyas Doshi)

  • Good PMs make metrics-driven product decisions. Great PMs make metrics-informed product decisions. Great PMs expertly blend quantitative and qualitative inputs, as warranted by each individual situation.

  • Great PMs view logic and reason as important tools, but they also know that people — and therefore the users and customers of their product — are driven by emotion more than by logic

  • Great PMs additionally listen to what customers don't say and they anticipate where the industry overall is headed in order to develop their product hypothesis.

  • Great PMs pay this degree of attention to the entire customer experience: they know that the documentation, the API, the blog post, the website, the canned responses, etc. are also the product.

  • Great PMs are more adaptive and don't take a one-size-fits-all approach. Great PMs employ a wider repertoire of frameworks and processes, expertly tweaking these tools for each specific team based on its composition, stage, and needs.

  • Great PMs know that career ladders are imperfect proxies: they are more fixated on tangible competence and impact than on checking off boxes on the ladder. Great PMs play the long game.

👉How Figma went remote (Platformer)

  • We have a biannual Maker Week. This is basically an entire-company event where everyone for a week can do whatever they want, as long as it's helpful to Figma in some way. We try to really make it so that everyone participates as much as they can.


đź—žIn the news

📱Technology

👉Netflix Earnings; Netflix and Gaming; Models, Not Mediums (Stratechery)

  • The idea is to offer video games on Netflix’s streaming platform within the next year,

  • The company doesn’t currently plan to charge extra for the content,

  • The more aggressively it can increase the perceived value of its offering the more aggressively it can increase prices, not simply improving its top-line but also cutting off its subscription-based competitors.

Increasing the value of the bundle

👉 Moore's Law for Everything (Sam Altman)

  • In the next five years, computer programs that can think will read legal documents and give medical advice. 

  • But other costs have risen significantly, most notably those for housing, healthcare, and higher education.

  • AI will lower the cost of goods and services, because labor is the driving cost at many levels of the supply chain.

  • Similarly, we can imagine AI doctors that can diagnose health problems better than any human.

  • A tax payable in company shares will align incentives between companies, investors, and citizens, whereas a tax on profits does not–incentives are superpowers, and this is a critical difference

🏥 Healthcare

👉Here are all of Europe’s mental health startups (Sifted)

A good overview of all the other players. We analysed the market in depth before deciding to launch Alan Mind, in order to build the best mental health offer in the market!

  • In France, for example, cases of depression doubled across 2020,

  • British startup Ieso Health. The company connects patients with therapists for online therapy via a chat service. Ieso has partnered with the UK’s National Health Service to offer free CBT (cognitive behavioural therapy) to everyone in the country.

  • Danish company Reflectly, for example, encourages people to journal in its app, then uses AI to select prompts for each person.

  • Silatha, runs guided meditations specifically aimed at women.

  • There’s German company Dear Employee, that aims to help employers continuously measure the stress employees are under through risk assessments. UK company Every Mind at Work runs tailored well being sessions for its employees through its platform.

👉Les plateformes de gestion du soin s’organisent pour peser davantage (Newsletter L’essentiel de l’optique)

  • Ce sont les cinq principaux rĂ©seaux de soins en France. Ensemble, ils totalisent plus de 50 millions de Français.

    • Carte Blanche Partenaires (plus de 7500 opticiens, 8830 chirurgiens-dentistes, 3360 centres d’audioprothèse. Couvre 8 millions de personnes, 12,5 millions en 2022) ;

    • Itelis (un rĂ©seau de 8 000 professionnels de santĂ© conventionnĂ©s, couvre plus de 10 millions de Français) ;

    • Kalixia (Issu du rapprochement des rĂ©seaux de soins de Malakoff Humanis et du Groupe VYV, Kalixia agit pour le compte de 16 millions de bĂ©nĂ©ficiaires. Plus de 6 600 opticiens partenaires, plus de 4 400 centres d’audioprothèse, près de 4 500 chirurgiens-dentistes) ;

    • SantĂ©clair (55 mutuelles et assurances clientes, 10 millions de bĂ©nĂ©ficiaires, 7 600 professionnels de la santĂ© partenaires) ;

    • SĂ©vĂ©ane (4 300 opticiens, 4 600 chirurgiens-dentistes, 2 800 audioprothĂ©sistes au bĂ©nĂ©fice de près de 7 millions de personnes couvertes en assurance complĂ©mentaire santĂ©, principalement par les Groupes GROUPAMA et PRO BTP).

  • Le 9 mars dernier, ces cinq plateformes de services santĂ© ont annoncĂ© une initiative commune : la crĂ©ation de l’Association des Plateformes de SantĂ© (APFS). Cette nouvelle association a pour objectif de mieux faire connaĂ®tre le rĂ´le des plateformes dans l’accès aux soins et de faciliter les relations avec les autres intervenants du secteur.

  • CĂ´tĂ© opticiens, on ne cache pas son inquiĂ©tude devant le pouvoir d’influence que reprĂ©sente la nouvelle entitĂ©. Après que ses membres ont amplement imposĂ© leurs tarifs Ă  la filière durant ces dix dernières annĂ©es, l’APFS est Ă  mĂŞme de peser plus directement encore sur les pratiques et sur l’avenir mĂŞme de la profession.

  • A ce sujet, le Haut Conseil pour l'avenir de l'assurance maladie (HCAAM) estimait que les acteurs regroupĂ©s au sein de l’APFS disposaient d’ « un pouvoir de marchĂ© significatif qui impacte significativement la structure du marchĂ©, qu’il s’agisse de la gamme de l’offre proposĂ©e ou des tarifs pratiquĂ©s », (HCAAM, La place de la complĂ©mentaire santĂ© et prĂ©voyance en France, janvier 2021, page 40).

đź’š Alan

👉Why we have engineering principles at Alan, from our Co-founder and CFO Charles Gorintin

  • At Alan, we have been scaling our engineering team from 7 engineers 3 years ago, to 80 engineers today. 

  • In order to build a common culture, we have rolled out internal engineering principles, centered around 4 pillars:

    • Impact

    • Ownership

    • Collaboration

    • Pragmatism

  • You can read more about them in this great article written by Charles Gorintin!   

👉Experience assessment at Alan: why we have level, and not roles    

  • At Alan, we do not have titles, but give levels to people based on the estimated impact they will have in our company

  • We do that to empower everyone: we want anyone in the company, whatever their experience, level, seniority, gender, background, etc. to have the same ability to voice his opinions 

Read more about how it works in practice for engineers in this great post by RĂ©my-Christophe Schermesser

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