Venture Bytes #59 - Spotlight on Stripe Gets Brighter

Spotlight on Stripe Gets Brighter

The fintech space has been buzzing with activity. Most recently, Visa spent $5.3 billion to acquire Plaid, the fintech company with an API that enables services for Venmo and other banking apps. Plaid’s software allows startups, such as the mobile investing app Robinhood and the cryptocurrency exchanges Coinbase and Gemini, to securely connect to users’ bank accounts.

This follows on the heels of a number of mega deals in 2019, including Fiserv acquiring First Data for $22 billion, FIS acquiring Worldpay for $43 billion, and Global Payments buying up TSYS for $21.5 billion. And in late 2019 PayPal acquiring Honey Science Corporation for $4 billion in cash.

Whether to connect consumers with fintech services, as in the case of Visa’s acquisition of Plaid, or to protect their turf against startups like Stripe, Square, and Adyen as in the case of Fiserve, FIS, and Global Payments’ acquisitions, the operative word in the payments space has become consolidation.

The rapid acceleration of the digital economy is driving fundamental changes in global commerce. Online commerce is powering global commerce and is predicted to represent a third of all consumer expenditure within the next decade. The key enabler of this boom has been the underlying payments infrastructure. The ability to offer merchants seamless transactions across different markets and networks while enabling them to safely and simply receive payments from their customers has catalyzed online commerce.

The payment process is becoming more and more “invisible” and fluid. Omni-channel consumer behavior has created opportunities for value-added technologies to emerge, leading to a friction-free payment ecosystem between merchants and buyers. Increasingly, consumers are using their smartphones for basic transactions, and companies are transforming everyday items into payment objects, while blockchain technology could change payment verification as we know it today. From cash to cards to digital wallets, the payments evolution continues to unfold.

Against this backdrop, the fintech space is expected to remain active in 2020. The incumbent leaders Stripe, PayPal, Square, and Adyen have dominated the lucrative payments market, with about 54% of the more than $1.3 trillion in gross payment volume globally (excluding Alipay and WeChat Pay in China). Additionally a number of startups are claiming a seat at the table, including companies such as Toast and Bolt with their own twist on facilitating commerce between merchants and shoppers.

One company that is expected to be in the spotlight in 2020 is Stripe. The 11-year old company has raised $1.3 billion in seven rounds to date, sports a $35.3 billion private market valuation, and is ripe for an initial public offering (IPO). Stripe offers a full-stack payment gateway solution that is flexible, seamless, frictionless, and mobile optimized. The company of choice for start-ups and SMBs, Stripe partners with its merchants to help expand their businesses by improving sales conversion, providing global reach, offering alternative payment methods, reducing losses through proprietary protection programs, and leveraging data analytics. Online and mobile merchants can onboard quickly with Stripe and are not required to invest in new or specialized hardware.

With a compelling market opportunity, a simple and scalable product designed for internet businesses, a deep roster of marquee customers in a business where APIs are deeply integrated into the existing payments infrastructure, switching out is cumbersome, and an untapped international growth opportunity, Stripe is in a strong competitive position. More importantly, Stripe is a bet on small and medium-sized businesses’ choosing pure-play online payment infrastructure providers over diversified players such as PayPal.

The number of new startups and entrepreneurs starting Internet businesses is on the rise worldwide. Stripe’s ability to acquire customers and lock them in with fully-integrated APIs and excellent customer service has proven to be a winning strategy and should provide a strong moat in the foreseeable future. The spotlight is on.

Autonomous Cars Front and Center at CES 2020

This year’s Consumer Electronic Show (CES) saw over 20,000 product debuts unveiling the future of technology. More than 4,400 exhibiting companies launched their latest tech products to some 170,000 attendees across more than 2.9 million net square feet of exhibit space. One area that attracted a lot of attention was autonomous cars – the electronics in the car, and the concept cars of the future. Given that cars are transitioning toward electric powertrains, autonomous driving technology, and connected online infotainment experiences, the attraction was obviously strong and expected to get stronger over the coming years. Three attractions broadly captured the autonomous car themes at the show: Sony’s Vision-S electric concept car, The Byte Company’s near-production version of the M-Byte crossover, and Mercedes’ futuristic concept car.

Sony, unveiled its Vision-S electric concept car. The Vision-S is a sedan with a dual-motor electric powertrain built by Magna Steyr. The company claims a top speed of 149 mph and 0-60 mph acceleration in less than five seconds. It has 33 different sensors on the car monitoring the external and internal environments. These sensors can, reportedly, allow the car to offer Level 2+ autonomous driving systems, as well as monitor the driver’s attention and provide customized infotainment. Sony also included a sophisticated speaker alignment that provides a surround sound setup for each individual driver, and a Byton-like infotainment screen. The presentation focused primarily on the interior and specs of the car, but no release date was announced, which points to the company’s strategy to sell primarily to the OEMs.

The Byton Company’s presentation was also noteworthy. A start-up co-founded in Hong Kong two years ago by former BMW and Nissan Motor executives, showcased a near-production version of the M-Byte crossover at this year’s CES, exactly two years after the Chinese startup first debuted its ambitious concept. The electric-powered SUV starts at $45,000 and has a 250-mile range. One of the most prominent features of the M-Byte is its massive 48-inch long dashboard screen. The screen can display various things including photos, weather, sports scores, stock prices, and directions, with the possibility of displaying multiple items at once. A smaller tablet is built into the steering wheel for the driver to control the various functions on the dashboard screen, as well as climate and other features. A passenger tablet is located in the center arm rest area, additional screens are located on seat backs of both the passenger and driver seat. Byton hopes to contend with electric carmaker Tesla, which has three electric vehicles for sale, providing motorists another luxury model in the EV. Pilot production of the M-Byte electric car has begun and will enter mass production later this year. The company has an 800,000-square-meter factory in Nanjing coming online to make the electric car. Byton said it has orders for 60,000 cars and the first cars will ship in China for customers in 2021.

Mercedes-Benz revealed its take on the vehicle as a “living creature” with the Vision AVTR concept, which takes design cues from the sci-fi fantasy film Avatar. The concept car embodies the German car brand’s vision of what mobility will look like in the distant future, with scales and a crab-like movement. The Vision AVTR is a more imaginative version of Mercedes’ Vision EQS luxury saloon car unveiled in September 2019 at the Frankfurt Motor Show, which is set to reach production in 2021. Both models feature the same structure that Mercedes-Benz calls a “one bow” proportion, which centres on a stretched profile with a long cabin, short bonnet and trunk, and expansive doors. A total of 33 “bionic flaps” are embedded into the back of the vehicle to emulate the scales of reptiles. These scales can communicate information to the driver and to the car’s surrounding environment via subtle “flowing” gestures. The front and rear axles of the car can be driven in the same or opposite direction, enabling the car to move sideways by around 30 degrees “like a crab”, as well as forwards and backwards, giving the vehicle an animal-like presence.

The $64,000 question is when will we see a fully functional car for the masses? Not for another 10 years at least, if not longer, based on the presentations at the CES, and the general consensus amongst the vendors. That said, autonomous taxis and autonomous trucks are expected to come out earlier than the cars for the general public, and understandably so, given the added safety and regulatory features required.