Stripe co-founder Patrick Collison on blockchain, regulation, and challengers to Silicon Valley

Patrick Collison became a millionaire as a teenager and was only 21 when he co-founded Stripe, the online payment processing platform now worth more than $9 billion. While this could place the company among technology giants, Collison said he intends to continue supporting small companies.

“One of the biggest questions as we think about the world in the next 10 years, the next 50 years, is, where will the balance be tilted between the incumbents and the upstarts?” Collison said in a new podcast interview with MIT Sloan’s Andrew McAfee.

“With Stripe, we think of ourselves, very deliberately, as being an anti-incumbency force,” he added. “I think we don't talk enough about the fact that firm creation rates in the United States are in fact declining, despite our prevailing narrative around ever-faster disruption.”

In his conversation with McAfee, co-director of the MIT Initiative on the Digital Economy, Collison discussed the future of Silicon Valley, starting Stripe as an “experiment,” the potential of blockchain, and the hindering role of regulations in the United States.

On founding Stripe and Atlas

Stripe started as a side project for developers who could set up a website, buy a domain name, and establish an internet business “as fast as you could type,” but needed to send faxes and mailed forms to banks in order to get paid.

“It seemed bizarrely anachronistic … What you wanted was a straightforward API for charging credit cards,” Collison said. This did not exist, he added, because it required crossing several industry sectors: “You had to be really good at technology, but you also had to be quite sophisticated in navigating the financial industry, and the legal industry, and global expansion.”

The company expanded as Collison realized that “it had this broader applicability and relevance.” Stripe is now available in more than 130 countries, supporting companies ranging from two-person software development shops to enterprises such as DocuSign and Salesforce.

The company recently launched Atlas, which provides a U.S. bank account, a U.S. Stripe account, and a U.S. corporate entity to developers anywhere in the world. This addressed a common hurdle for entrepreneurs — the bureaucracy of starting a business — which larger firms can better navigate.

“We hear what’s holding innovation back [at Stripe]. This went under-addressed, because it ... was just a hassle,” Collison said. “It wasn’t a firm restriction. It was just friction.”

On regulations in the United States

Collison was born in Limerick, Ireland, in 1988. As an immigrant, he has firsthand experience with the firm restrictions, beyond bureaucracy, which make it difficult to start and grow a business in the United States.

Along with immigration policy, Collison listed challenges such as occupational licensing, the cost of moving from place to place for work, and the unintended consequences of business regulations — which he described as a “positive-sum social utility” — which nonetheless value incumbents over disruptors.

For example, the Dodd-Frank Act improved financial stability and consumer protection, but no new banks have started in the U.S. since the law was passed in 2010, Collison said. Frequently cited regulations in the taxi and hotel industries hurt disruptors such as Airbnb and Uber, he added.

“It’s extremely difficult, and in many cases impossible, to take a step forward with something that could be extremely beneficial and valuable. It’s tempting to say, ‘They should just make sure they do it while satisfying all of the existing rules, and laws, and so on,’” Collison said. “The practical matter is, a five-person company looking to get off the ground cannot go and hire licensing experts in 50 different states, and [a] 20-person legal operation.”

On the future of Silicon Valley

After briefly attending MIT, Collison moved to Silicon Valley in 2007 after securing funding from Y Combinator for his first startup, which was merged with a British-based startup and renamed Auctomatic. This made Collison and his co-founder, his younger brother John, teenage millionaires.

Despite finding success in Silicon Valley, Collison said he expects technology innovation to be less concentrated there in 20 years. One reason is the high cost of living, which makes it difficult to attract entrepreneurs looking to get started. Another is the strength of China’s private technology companies.

A third reason, Collison said, is the rapid growth of software development skills around the world — often from informal learning from online courses and communities such as GitHub and Reddit as opposed to formal education.

“The sophistication of entrepreneurs and developers in previously unexpected parts of the world is rapidly approaching par with those in the U.S.,” he said. “And I think that’s awesome.”

On the potential of blockchain

For Collison, this sophistication of developers and engineers is manifested in interest in blockchain, particularly among mature companies that fear being supplanted by younger, smaller firms with the expertise to develop disruptive blockchain applications.

Collison said he is “pretty confident” that at least 95 percent of blockchain applications will fail. However, he also called it an important industry that he supports. Stripe provided $3 million in seed funding in 2014 for the cryptocurrency Stellar, developed by a nonprofit that Collison co-founded; Stellar’s market cap is now valued at about $4 billion.

“There’s tons of stuff happening at the margins and the fringes. There’s great experimentation there,” Collison said. “And it’s possible that some of it works. If it did, that would be really cool.”