Stripe is a well-known innovator in digital payments. They attacked one of the most intimidating and locked-down markets, and made it look like child’s play. They have a compounding competitive edge in processing payments more efficiently for their customers, and the best-crafted APIs in the entire industry. Stripe is admired on these grounds, and more: they have their own press, in line with their thoughtful, public intellectual staff.
Stripe’s mission is to increase the GDP of the internet. As part of that mission, one of their many products is Atlas, a service that allows entrepreneurs from around the world to incorporate Delaware LLCs and C-Corporations.
I believe that Atlas is core to Stripe becoming a $100B+ company.1 But what’s so special about an incorporation service? Hundreds of thousands of companies get incorporated every year, and there are plenty of online incorporation services already.
For a start, Atlas is much better than its competitors. Though this might at first look like a well-commoditized market, it is not at all. Services like LegalZoom, CooleyGo, etc. offer a smaller set of incorporation options and a lower quality of legal formation documents. Meanwhile, Atlas is as good as having an Orrick lawyer do the job, while being an online form a tenth of that price. Even a cheap lawyer is still twice as expensive for the job. Plus, Atlas is unique in that it services international entrepreneurs!
That being said, even being the best incorporation service in the world might be worth at most a few billion dollars. The exceptional value in Atlas is in the lock-in it enables for B2B services added on top.
The biggest challenge of B2B services is customer acquisition. How do you win over enterprise clients when existing relationships are so sticky? The current dominant strategy is to be the first one there. Start working with a company at the earliest stages, in order to make actual money off them a few years down the line, when they’re much bigger and need more expensive services. This strategy is everywhere: AWS extends credits to lock the earliest startups into their cloud platform. Brex advertises specifically to seed-stage startups, but they only start to really make money when those startups are Series-C companies.
Atlas is the ultimate player in that strategy. There’s no earlier stage to get involved than at incorporation. Stripe is already using Atlas in the obvious way: companies incorporated with Atlas automatically have a Stripe account, and can get automatically get a Silicon Valley Bank account2 set up so they can start processing payments, via Stripe, immediately. That’s extremely powerful lead-gen. But the potential for Atlas is much greater yet: Atlas could automatically set up the company with a corporate credit card, and all the required insurance. It could set a customer up with a password manager, a virtual mail address, accounting, and so on. Each of these are multi-billion-dollar markets.
The endgame for Stripe Atlas is that it offers a business in a box, and in turn it determines the B2B service3 spend of such a business in perpetuity. This is staggeringly powerful: first, it demolishes barriers to entry for new entrepreneurs, handling all the tedious operational setup items, so the entrepreneur can focus 100% on building a great product. This is a real social good, for entrepreneurs and their customers around the entire globe. Second, it puts up massive barriers to entry for competing service providers: things like credit cards, insurance, accounting, virtual mail, etc. all have low churn. Once a company launches with Atlas, a random accounting service provider would effectively be forever locked out from getting that company as a customer. Atlas reigns as gatekeeper supreme. For an infrastructure company, owning the point at which customers otherwise start to choose their infrastructure is a position of unparalleled competitive strength.
Disclosure: I am not an employee of Stripe, paid by Stripe, and do not currently have any financial interest in Stripe.