PayPal challenger Stripe valued at $1.75B in funding deal

Stripe Inc has joined the billion-dollar club.

The online payment-processing startup announced Wednesday it raised $80 million from venture capital investors in a deal that values Stripe at a hefty $1.75 billion.

The transaction places the 90-person firm in the rarefied company of startups valued at more than $1 billion just three years after brothers Patrick and John Collison, now ages 25 and 23, debuted their service.

Chief Executive Patrick Collison said the lofty valuation reflected the promise shown by his company, which processed billions of dollars in payments last year for businesses ranging from Lyft, the ridesharing company, to the Museum of Modern Art in New York. The company did not disclose specific details on the total.

The startup's rapid growth has spurred talk in Silicon Valley of an insurgent threat to PayPal Inc, the eBay Inc subsidiary that has not faced serious competition in a decade.

Stripe collects 2.9 percent of every transaction plus 30 cents.

"It's a nice validation of what everyone has gotten done over the last year," Collison, who dropped out of the Massachusetts Institute of Technology in 2009 to found Stripe, said of the recent investment.

Collison dodged any direct comparison to PayPal, but he said he was confident the demand for payment processing would only explode in the coming years because only 2 percent of all commercial transactions take place online today.

"There should be more transactions happening on the Internet on a macro basis, whether you believe that should be 20 percent or 40 percent," he said. "Well, what is holding it back? Our goal is to expand Internet commerce. We approach that problem rather than the competitive angle."

Stripe announced its funding on the day when activist investor Carl Icahn called on eBay to spin-off PayPal, a fast-growing unit that has thrived while eBay has grown at a more modest pace in recent years.

PayPal's co-founder, Peter Thiel, who has backed Stripe since its early days, led Stripe's most recent funding round through his venture capital firm, the Founders Fund.

Stripe's other institutional investors include Sequoia Capital, General Catalyst Partners and Khosla Ventures.