A VC lays out the 2 strategies he believes have made $95 billion Stripe so wildly successful

  • $95 billion payments company Stripe is the most valuable tech startup.
  • OpenView partner Sanjiv Kalevar says two parts of its strategy have driven its success: product-led growth and usage-based pricing. 
  • “It’s a very powerful business model,” said Kalevar, who has not invested in Stripe either individually or through his firm. 
  • See more stories on Insider’s business page.

Thanks to a recent $600 million funding round at a $95 billion valuation in March, payments company Stripe has catapulted to becoming the most valuable tech startup ever.

Sanjiv Kalevar, a partner at the 15-year-old Boston-based venture firm OpenView, believes that two specific strategies have helped the firm succeed. 

Neither OpenView nor Kalevar have any official relationship with Stripe, although his firm has invested in other enterprise technology companies like Datadog, Instructure, Workfront, Calendly, and Expensify, and he previously invested in the financial data app MX before he worked at OpenView. He says he’s been studying successful startups that operate like Stripe in order to help him find (and invest in) the next smash hit. 

Kalevar — who previously worked as a principal at Battery Ventures — believes Stripe is successful because its “product-led growth” strategy and its usage-based product pricing. 

“Product-led growth” is essentially when a product call sell itself as opposed to needing salespeople to spearhead customer deals. The product often spreads by word of mouth, and it’s easy for any individual customer to sign up for the product online. 

With Stripe, developers can swipe a credit card and have the payments system up-and-running in their app up within minutes – all without talking to a single sales representative. As a result, developers all over the world can easily access Stripe’s technology without needing to jump through a lot of hoops. 

Similarly, Stripe’s usage-based pricing model means that it only charges customers based on their payment volume and how much they’re actually using the product. That too lowers the barriers to entry, since it allows firms to start slow and ramp up their usage, instead of buying in at a high price tag right from the beginning. 

“Basically the balance of power has shifted from the vendor to the customer, and usage-based pricing is the perfect alignment,” Kalevar told Insider. “That’s why it’s a very powerful business model.”

OpenView tries to invest in companies that take that strategy, Kalevar says.

Kalevar predicts what Stripe could do with its fresh funding

With plenty of cash on hand from its latest funding round, Stripe could make some new investments, Kalevar predicted. 

Stripe announced in October that it acquired the Nigerian fintech startup Paystack for $200 millio and the firm could continue to invest in or even acquire other payments startups that operate abroad, Kalevar said. It could also build out its own infrastructure, too. 

Sanjic KalevarBattery Ventures

One challenge Stripe may face, according to Kalevar, is not being as customizable as open source payments tools like OpenACH or Kill Bill. 

“There’s not a lot of customization you can make with an iPhone,” Kalevar said. “Stripe is the same way. I’ve been looking and chatting with a lot of merchants who want more flexibility.”

Still, Kalevar sees several potential areas of expansion for the firm: Stripe launched Stripe Treasury in December which allows merchants to easily embed banking services and there’s a whole slate of related products Stripe can launch, like APIs for wealth management, he said. 

“Stripe is a truly amazing business,” Kalevar said. “They brought a lot of simplicity and elegance to what is a complex market of payments and infrastructure.” 

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