What type of companies does the fastest-growing unicorn in Silicon Valley acquire? Let’s find out.
Stripe — the darling of Silicon Valley
Stripe helps other companies process payments online. Their focus on being developer-friendly has clearly paid off with their latest private valuation of $36B.
Busy with acquisitions
Stripe started acquiring companies around 2013 and since then has acquired one per year like clockwork.
Below you can see them classified according to my categorize of rationale for acquiring companies.
Stripe acquiring one company per year like a clock (although not a perfectly functional one).
Some of the more notable ones are:
- Teapot is a provider of simple APIs for identity verification, trust, credit and more.
- Indie Hacker is an online community for starting companies. I define it as a business acquisition but in reality it’s more about marketing.
- Index creates Point of Sale software. Obviously, an acquisition to accelerate Stripe POS product offering.
- Touchtech Payments is a startup based in Ireland that works with banks to help them build and manage Strong Customer Authentication. I can imagine the tech. + talent helped Stripe stay compliant with the new SCA regulations in Europe.
The surprising direction of Stripe’s acquisitions.
As noted with Shopify they moved in a straight line up the tree of acquisitions. Starting with talent and tech., then product, and the later years acquiring companies for their business.
Stripe does not show the same journey at all with an acquisition strategy more focused on talent and tech. The only business that could be classified as a business acquisition is Indie Hacker but their revenue is negligible in comparison to Stripe’s.
Why the discrepancy?
It’s never obvious looking outside in a company for their acquisition strategy but I think there are multiple reasons, as always, to why Stripe has not gone after more product and business acquisitions.
- Stripe still very early in market penetration. When the opportunity is still huge for the main product it makes more sense to keep focused and keep adding engineers at solving the problem. That said, I think Shopify’s later business acquisitions were rather opportunistic than that they actually went out to find them.
- Hard to find companies to acquire. I can imagine it’s hard to find companies with products or tech. That makes sense to acquire. That said, there has to be a ton of fintech startups out there up for grabs so this cannot be the only reason.
- They don’t focus on M&A. This is probably partly true, however, Stripe has done a ton of investing into startups (a theme for another week) so they clearly have the capability.
Fintech acquisitions are hard
Shopify used M&A to expand into Europe and strengthen its customer base in the US. They acquired the companies and migrated the customers. The thing is, you cannot do that for payments. The customers themselves need to migrate over it’s impossible to simply integrate the tech. stacks. This should be the main driver for the lack of business acquisitions.
In a similar manner, it’s hard to find product acquisitions if you are Stripe. For Shopify, their product acquisitions were driven through their app marketplace. If an app was popular enough they simply bought it and offered it as an integrated part of their offering. That way, their core offering became even better driving more sales and retention. Sure, there are a myriad of apps built on top of Stripe, however, does Stripe really want to acquire an analytics app built on top of their API:s? How does that move their core metrics? It’s rather a dilution of their focus than to double down on their core mission.
Stripe fascinates me as a business and even though their M&A activity has been quite limited in scope they have both had a broad investment work and launched multiple products outside of payments around their mission to Grow the GDP of the internet.