This Week in Startups
00:32:48 · Patrick Collison
[00:32:48] S4: Well, look, I don't want to speak ill of any particular company, but, we heard from our friends, and from people around us building companies and so on, that some of the companies they worked with were occasionally suboptimal. But you know, it's easy to kind of focus on PayPal, I think that's actually, know, obviously they're pretty large and established and so on, but it certainly was not just them, and that sort of when we look to our friends, people we knew running companies and so on, and most actually weren't building on PayPal. Maybe perhaps in part for those reasons or others, or I don't know, but most of them weren't. Most of them were building on these legacy players, like they were working with banks, they were working with gateways, processors, of stuff like this, right? And they were sort of looking to buy essentially a technology service from them, right? I mean, they wanted APIs for sort of turning credit card numbers or whatever the payment instrument was into money in their bank account, right? That's kind of the service they were looking to buy. But these companies, which were, again, providing an AWS like service in terms of the core nature of it, you know, they were not equipped to be AWS. They were not equipped to sort of provide flexible APIs or to, you know, to to to enable people to really iterate.
00:33:53 · Alex Wilhelm
[00:33:53] S3: I absolutely love that clip because there's a bit of a historical echo here, Lon. I... I'll let you talk about the acquisition that didn't happen in a second. But if you go back to 2017 and you look at the stock price of PayPal at the time, it ranged from about $40 a share at the start of the year all the way up to about $80. But it was about 55 in the middle of the year, and it's currently at about $55 per share. So at the time, PayPal is probably worth about what it is now, $4,850,000,000,000 dollars. It's gone up. It's gone down. It's back to where it was. In the meantime, Stripe has just been churning along.
00:34:24 · Lon Harris
[00:34:24] S0: Yeah. Of course, as as, as we sort of tease, Stripe and Advent International made a joint offer to acquire PayPal for about $60.50 a share. That would have valued it at about $53,000,000,000, a little bit more. But, you know, that it did it did not, that that was for mid July. We so far don't have an update from PayPal. It looks like maybe that particular deal has sort of stalled out. Just, you know, in in retrospect, funny, nine years after these comments that they sort of came back around to each other. The other thing I think that is so fascinating is not only has PayPal remained, like, sort of consistently valued in in all of that time, a very long time in the technology world, but it's so fundamentally the same offering. I mean, it just it's like PayPal always stayed PayPal. They didn't... All these other fintech revolutions have happened. I've now got... You know, I had the PayPal app on my phone this whole time. Now I've got Kalshi next to it. Now I've got Zelle next to it. Now I've got Venmo next to it. Now I've got Robinhood next to it. And it's like, why didn't PayPal become any of those other things? It's sort of a fascinating question.
00:35:30 · Alex Wilhelm, Jason Calacanis, Lon Harris
[00:35:30] S3: I mean, I think you're describing what... Like, the entire opportunity for startups. Because what does a startup do? They go into a market where the incumbent is lacking, say... Or they invent a new market. In this case, I think what startup did was a bit of both, attacking incumbents and creating something that was new. You saw Patrick in that clip talk about how some companies want to be like the AWS for payments, but they don't have the actual tech for it. So clearly, they were improving the tech, but also doing something that we've seen before much better. And the market will respond. So if you look at the most recent results, Lon, if you look at PayPal's second quarter results from this year, revenues were up 5% year over year, which is essentially zero after inflation, if you want [00:36:09] S2: do it that way. [00:36:09] S0: As well be nothing. Yeah. [00:36:10] S3: Might as well be nothing. I think this is just the risk. Know, we... A large company spends more time defending its cash flows than it does innovating. And sometimes you can see an incumbent that was built as a disruptor originally fall prey to the same foibles that caught up their previous generation's competitors. Another example of this recently, I would say, Amazon blocking Muse and Instinct and other agents for being able to interact with its website because it wants to charge ad dollars against human eyeballs, not facilitate machine transactions. Mistake. Fundamental mistake that will bite them in the backside.
00:36:10 · Alex Wilhelm, Lon Harris
[00:36:10] S3: Might as well be nothing. I think this is just the risk. Know, we... A large company spends more time defending its cash flows than it does innovating. And sometimes you can see an incumbent that was built as a disruptor originally fall prey to the same foibles that caught up their previous generation's competitors. Another example of this recently, I would say, Amazon blocking Muse and Instinct and other agents for being able to interact with its website because it wants to charge ad dollars against human eyeballs, not facilitate machine transactions. Mistake. Fundamental mistake that will bite them in the backside. [00:36:42] S0: Yeah. We said that on the show. There was, like, a... There was a clip going around that we put on social about Jason. I think it was with me talking about this. And people got so mad. They were like, it obviously makes sense that Amazon would like, why would you guys even expect Amazon to, like, play along? Like, they want you to use their own agent. And it's like, it doesn't... It it doesn't... The moment you try to do it and then you can't buy something off of Amazon with your agent and you get frustrated, that's the moment it becomes a mistake. Like, it's... They should be facilitating any way you wanna buy things. They're Amazon. That's what they do. They sell you things in an easy direct fashion. That's like the whole big They should
00:36:42 · Lon Harris, Alex Wilhelm
[00:36:42] S0: Yeah. We said that on the show. There was, like, a... There was a clip going around that we put on social about Jason. I think it was with me talking about this. And people got so mad. They were like, it obviously makes sense that Amazon would like, why would you guys even expect Amazon to, like, play along? Like, they want you to use their own agent. And it's like, it doesn't... It it doesn't... The moment you try to do it and then you can't buy something off of Amazon with your agent and you get frustrated, that's the moment it becomes a mistake. Like, it's... They should be facilitating any way you wanna buy things. They're Amazon. That's what they do. They sell you things in an easy direct fashion. That's like the whole big They should [00:37:17] S3: have the world's biggest hook outside for my agents to hook onto. They should accept any possible type of payment that I want. Yeah. They should have an intelligent way to handle my permissions. And you know what company would support that? Stripe. Stripe. [00:37:28] S0: Who had... [00:37:28] S3: Who was working on agenda payment. I think it is. Exactly. So it's it's it's fun to see people that were right stay right, and I'm I'm really glad that they didn't buy PayBucks. I think that deal looked really dumb from the outside. I'm sure there was more logic to it, but I'd rather have Stripe unencumbered than Stripe dragging PayPal behind it like the alien in, Independence Day.