I recently decided to interview for the first time in a while (and ended up accepting an offer - today is my last day at Google, after over ten years).

Anyway, Stripe would have been on my shortlist...except for exactly this problem. My criteria were "mid-sized public companies hiring lots of Googlers" and Stripe obviously didn't pass the "public" part of that. It's hard enough to think about what will happen to an RSU grant if the Fed raises rates or some relevant legislation gets passed; I don't want to have to form an opinion about private valuations on top of that.

Hey congrats on your new role, hope everything goes well for you and the transition is smooth

Thanks, so do I. :)

I'm looking for similar profile companies - if you don't mind disclosing, who ended up on your list of companies to talk to?

Coinbase and Roblox - it was a short list. I ended up with compelling offers from each, and would happily have taken either in the absence of the other. That said, in the end I chose Roblox.

Hah, I had the exact same list when I went back to work in 2020. Ended up choosing Google again precisely because they were public (Coinbase and Roblox had not IPO'd at the time), and then the stock of the latter two 10x'd after the IPO.

Much harder to come up with that list a couple years ago, nice calls. I don't have the risk appetite required for potential 10x upside - I have a few kids and my wife doesn't have an income.

But I don't think 2-3x is necessarily out of the question...

Open up your mind, and you will be free.

You've set limitations for no reason, based on incomplete data.

I predict you will be out of Robolox and into another company within 18 months. But it will be better than you can ever imagine. - The programming Guru

I am going to assume that is because the package includes RSU and you want your RSU to be of more certainty in value. What if your package is just a plain higher salary? Would you still go for a public company or would you also consider private ?

I'd work for a private company that paid me a cash salary equivalent to my expected salary + RSU comp, yes. But I'm not sure where I'd get that kind of salary.

Stripe don’t get even close to the full fee of card transactions. Most goes to the issuing bank. They would be lucky to clear 0.8% of a card transaction and it’s likely much lower

When Square published its card processing margins in quarterly reports, they kept about 1% - roughly a 33% margin. They have since stopped publishing this metric.

For instance here, page 7 [1] in Q4 2016, Square reported a 1.04% transaction margin against 2.94% transaction revenue.

[1] https://s29.q4cdn.com/628966176/files/doc_financials/2016/SQ...

Thanks that’s handy to know! At their volume they can obviously get better rates from the bank. I do wonder knowing that what the actual revenue is and perceived IPO valuation. I can’t see it being $100B unless they doing crazy numbers on their other products

In EU (which I assume is a significant market) the max banks can charge is 0.2/0.3%. Their standard fee is 1.4% + €0.25, so yeah, they should probably end up with ~1% or so.

I'd assume their margins in other less regulated markets should be similar

Why can't this law be introduced everywhere else.

It makes no sense to pay so much for simple payments.

Most of interchange goes to the issuing banks to pay for loan origination, defaults, chargebacks and most significantly reward programs. The EU doesn't really have comparable credit card based reward programs since they can't fund them with the smaller interchange. It's kind of six of one, half a dozen of the other.

In countries without these regulations Visa and Master argued most of these processing fees goes back to customer as cash back or gift or other forms of benefits. In the AUS and EU ruling the court simply decided that is not a business model being accepted in the market. And tell them to put out a fair price of payment processing.

And most of the payment in EU are still done via Debit Card or something similar so they have less leverage.

Along with high level of fraud in US credit card compared to EU.

You are forgetting the $0.30 per transaction. That is pure profit for them too.

Card fees have both a variable (X percent) and fixed (Y cents) portion. For example, a transaction using a Visa credit card might cost 2.7% plus $0.10.

Not forgetting it but it doesn’t move the needle much. If you assume an average card transaction size of $10, which is likely higher. That is only 0.3% of processing which may increase revenue by 30% at best.

You're off by an order of magnitude - $0.30 of $10 is 3%, which overshadows the 0.8% by quite a bit. Although I agree that $10 is most likely a low estimate, I'd expect $0.30 per charge to have a very non-trivial impact.

Well spotted. My quick math was very incorrect. Thanks for the correction

Right but they’re talking revenue, which isn’t net of expenses.

An important detail here is that the raise was a whole year ago, back when Block's market cap was far higher: I don't have their issuing/buyback data on hand, but their shares were flying as high as $270 per share, when today they are at $123.

So the 95B is probably more than Stripe would be worth today if they raised. Compared to the old Block share price, Stripe's valuation back then was good, but not crazy.

Keep in mind that Block's $17.6B revenue includes CashApp which makes up almost half of their revenue.

It looks like the $640B payments processing does not include BaaS & SaaS products offered by Stripe

Dumb question, how does CashApp make so much money? Isn't it a free app with no fees? I have to imagine the free 1-3 business day deposit is highly preferred to the 1-3% transaction free instant-payment-deposit feature.

Block has an accounting quirk where they report Bitcoin that users purchase through CashApp under "revenue".

Revenue feels like the wrong place for this number to show up, but the result is that it inflates their revenue number

They are legally required to report it that way. The quarterly shareholder reports include revenue with and without Bitcoin.

Which is amazingly transparent for a public company to do.

Purchasing Bitcoin as revenue?

I am not sure the justification of it. Ages ago the debate was, if bitcoin was asset, currency or commodity? But how does buying something through an exchange results in the asset's entire price to be recognized as revenue for the company? They are doing it only for Bitcoin, not for any other things. I have no clue because it doesn't make sense.

From the 10-k [0]

...customers access to hundreds of listed stocks and ETFs, as well as the ability to buy and sell bitcoin. Stocks, ETFs, or bitcoin can be purchased...e. For bitcoin buying and selling, we recognize revenue when customers purchase bitcoin and it is transferred to the customer's account.

...During the year ended December 31, 2021, we saw a significant increase in total Cash App revenue, primarily from bitcoin revenue which contributed 57% of total consolidated net revenue in 2021, and 48% of the total increase in consolidated net revenues in 2021

[0] https://www.sec.gov/Archives/edgar/data/1512673/000162828022...

I’m not an accountant and just guessing here, but I’m thinking it’s because it’s treated as a purchase of an asset or a good. Similar to how if you went and bought a refrigerator, the appliance store would book what you paid them for the fridge as revenue.

It seems crypto can have multiple definitions based on what’s most convenient at the time.

I posted to r/accounting.

Two people there said that, it maybe is transaction fees. But they have asked me to look into the numbers. I think they are right, but I still find the phrasing to be quite ambiguous tbh.

https://www.reddit.com/r/Accounting/comments/tzbg6i/what_is_...

Why, dark patterns of course. They've managed to trick my mother into using the instant feature by moving the UI elements around at least once.

CashApp made most of their money through Bitcoin and the exchange fees (something like 70% in 2021?). Additionally, they charge extra for instant transfers in and out of CashApp. I believe its 1.5%.

Lastly, they also make money by keeping the Cash in the CashApp/Square network. Since it is all within Block, they will not have to pay interchange fees when a customer pays with CashApp to a Square merchant.

Lots of comments related to Block revenue wrt Bitcoin that needs some context. Block is making inflated revenue because they're legally required to report buying a Bitcoin for $49.5k and selling for $50k as $50k in revenue, even though their profit will be negligible. Since their bitcoin fees, their gross profit is a much better metric, as how many bitcoins they're skimming, adding to inflated revenue metrics, is meaningless.

There's also money left in Cash App after someone pays you.

you can do a lot with 3 days of money.

Any sources on Stripe not being profitable?

No - that's why I said probably. If you are growing at 60%, have access to good talent, funding, and can stay a private company for a 1-2 more years if you need to - then the rational approach is push all your dollars in growing/creating moats. I expect them to be slightly unprofitable, but who knows :)

did Magic Leap create a moat after they raised 1.4 billion?

They can be profitable but prioritize growth at this stage. Profits are an eventual goal once public. Not required when all shareholders are private.

This is more about block being undervalued than striping over valued. Besides, the business Block has plenty to be excited about (ability to reinvent themselves and emerge from their existential black swan event during covid) and worried about (volatile philanthropic CEO)