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Exploring the world of B2B payments and Stripe's SaaS survey
My chat with Suzanne Xie, Business lead of B2B Payments at Stripe
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Today’s chat is with Suzanne Xie, Business lead of B2B Payments at Stripe.
Sar: I enjoyed your talk at SaaStr. What underrated pointers would you want more people to know to improve public speaking?
Suzanne: It’s conventional wisdom that the best public speakers are storytellers, and storytellers need to include enough concrete, specific details to paint the picture and draw the audience into the topic. Another is to remember what’s interesting to the audience, not just what’s fun for you as the speaker (these can sometimes be different).
Stripe has a strong writing culture, and a big part of doing that well is being crisp and punchy while also getting neck-deep into the details (we think this is an important part of speaking ‘up’ to your audience). Internally, we refer to this as turpentine, after a saying of Picasso’s: When art critics get together, they talk about form, structure, and meaning. When artists get together, they talk about where they can buy cheap turpentine.
Turpentine is what’s going on at the one-inch altitude of a topic. The important reason is that even the smartest people can’t get things fully right without a ground-level perspective – a visceral sense – of what’s going on. This applies to public speaking as much as problem-solving, whether at a company all-hands or team meeting.
Sar: You founded multiple startups in the 2008-2012 era. How do you look back on that journey in relation to the environment we are in today?
Suzanne: That era does feel like generations ago. My first company was called “Weardrobe,” which was one of the first user-generated content platforms for fashion influencers. The platform and community dynamics pointed towards the coming creator economy at a time when some investors still questioned the TAM of “online shopping.”
2008 was in the depths of the financial crisis, and the performance of public markets quickly affected private markets. It got harder to raise capital, and founders had to figure out paths to profitability quickly.
I lived on Google Analytics and sent manual invoices. When we started Lightwell, our team spent weeks working out how to handle recurring revenue. Today, founders have more tools at their disposal: analytics and billing are entirely automatable. Figma runs an entire finance organization with fewer than five people.
Founders will find a way to make things work—that’s what it means to be a founder. But those tools mean today’s businesses are more resilient, with more opportunities to pivot without making large capital expenditures.
Sar: You did voiceovers for the interactive games you built for kids at Lightwell, your second startup. What are your thoughts on recent developments in generative AI?
Suzanne: Voiceover work was a more challenging and fun part of creating the original IP. While we worked with talented voiceover artists, our entire team voiced characters in our series, which gave us all a deeper understanding of the content and tooling. I ended up being the voice of our main character, Pandora Beribolt, a feisty fearless purple panda with a penchant for snacks.
AI is driving recent innovation in audio tools, like Descript, getting funded by OpenAI’s Startup Fund. I expect we’ll see more as new generative AI audio applications come on stream. This is one example of the power of digital tools as infrastructure: the set of use cases that can be built on these kinds of tools is unbounded.
Every new generation of technology brings about a new generation of creative tools, from printing presses for publishing, video and special effects for TV and film, to app engines for interactive apps and games. We should also expect new classes of media from the new generation of creative tools.
Sar: I think we have made much more progress in culture and tooling in starting new internet businesses and buying software than in growing internet businesses and selling software over the past decade. Do you agree? What can we attribute that gap to?
Suzanne: I do agree. Growth is hard. When growing a SaaS business, the rate limiter isn’t building the software; it’s selling it. Better dev tooling—particularly no-code tools—and high-quality APIs mean businesses can build and ship entire apps in days that would have taken the team months to build.
Historically, tools for selling hadn’t kept pace. Scaling payments—particularly recurring payments—remained too complex as businesses tried to manage multiple revenue streams and accept payments across different countries and currencies.
Stripe’s growth is an example of how that gap is closing. We started offering a payments API, but now we’ve built a SaaS stack alongside it. Businesses can build on these products to run their billing and financial operations, like automating subscriptions, invoicing, revenue recognition, and reconciling multiple revenue streams.
Sar: Can you talk about your view that subscription businesses are hard to build because of the complexity of the financial stack?
Suzanne: The minutiae of how you accept payments from your customers aren’t something many founders think about, but 81% of customers we surveyed recently said they frequently abandon their checkout cart if their preferred payment method isn’t available.
As you hit escape velocity, you have to account for local preferences—did you know that the second most popular way to pay for things online in Japan is to go to a convenience store and pay in cash? New payment methods, like buy-now-pay-later or wallets, crop up all the time, and which payment methods are most popular shifts over time as preferences change.
Tax and compliance complexity is another unexpected challenge. There are over 11,000 sales jurisdictions in the US, and few founders know the ins and outs of what percentage they need to withhold in what state and at what threshold they need to start paying. There's an average interest of 30% on past-due sales tax, so getting this wrong can be expensive.
Countries have different regulations for how invoices are presented and what information is included. In many European and Asian countries, businesses must submit e-invoices for government validation before sending them to customers.
Founders used to the logic of software are often shocked by the complexities and compliance involved in just getting paid.
Sar: Stripe has been investing heavily in helping B2B payments after a decade of simplifying how businesses get paid by consumers. What are the underappreciated quirks of B2B payments that observers of the consumer payments world might miss?
Suzanne: The gap between consumer and business payments is getting starker. With consumer payments, you hit send, and the money transfers, whether you’re buying from a website or sending money to a friend.
The vast majority of B2B transactions globally are still initiated via paper invoicing, and over one-third of B2B payments are conducted with cash or check. Businesses still (in 2023!) have to create a quote, generate an order, then generate an invoice, verify that invoice, and maybe send a couple of reminders. You still have to reconcile the revenue and calculate and report the sales tax when you get paid.
If you sell internationally, you have to adapt your invoices to local languages, requirements, and payment methods and reconcile revenue in multiple currencies.
Where’s the Venmo of business payments eliminating all this? It’s not an academic question because the B2B payments system is six times bigger than the consumer payments system, processing $120 trillion annually. The cumulative strain this puts on businesses is a massive drag on global growth.
More efficient B2B financial infrastructure can make getting paid, managing revenue, and compliance easier. Stripe’s aspirational view is it can serve as an efficiency booster for the global economy.
Sar: Does working on tooling to help businesses manage recurring revenue necessitate a shift in product mindset for those who have worked on consumer or non-recurring business payments?
Suzanne: The subscription is the payment method and the product you sell for recurring revenue businesses. That means businesses need to integrate payments into the product experience for the subscription to work well. This differs from non-subscription consumer payments, usually siloed from the rest of the product.
Recurring revenue businesses need to optimize for both customer conversion and customer retention. It goes beyond an optimal checkout experience to include complexities like tiered pricing and promotions.
Our State of Checkouts data shows that many subscription businesses in North America could be doing more to optimize their pricing for conversion: 57% of subscription sites did not offer a free trial allowing users to try before they buy, and 51% of subscription sites did not provide fields for coupon or promo codes. Recurring revenue businesses need to think about how to keep customers looking to cut back on subscriptions and make the subscription payment function properly.
The good news is these challenges are solvable, and businesses don’t need to develop the expertise. Billing and revenue management tools, like the ones we’re building at Stripe, work off-the-shelf, freeing businesses to focus on the products they want customers to subscribe to, not the payment details.
Sar: Stripe recently surveyed 2,500 SaaS leaders about their 2023 growth plans. Can you share a few interesting findings?
Suzanne: I was impressed by the confidence of the SaaS executives we surveyed. 63% of the people at B2B recurring revenue businesses are confident in their growth in 2023. The economy’s headwinds look tough, but a larger story is missed about the value of SaaS solutions for all kinds of businesses, large and small. 57% of businesses actively seek to use more no-code and low-code software to cut costs by using automation instead of reducing headcount. They’re consolidating software and doing more with less.
74% told us they plan to invest in embedded financial services this year, offering loans or charge cards to their customers. Those are new sources of revenue amidst economic disruption, which is not traditionally when businesses can afford to make big pivots.
We’re focused on building tools that reduce the complexity of financial processes and help capture more revenue without additional headcount at little cost.
Sar: Talk about what you call spreadsheets of shame.
Suzanne: “Spreadsheets of shame” is the system founders create via Excel to manage their books manually. These systems are typically inefficient and error-prone. We’ve heard from businesses that they can spend 200-300 hours each month making their books compliant with accrual accounting rules. And what’s more, they don’t scale with the business. As you add complexity to your business – for example, a new revenue stream – these hard-coded systems take too much time and resources to update.
I sometimes hear that Stripe is building picks and shovels, but we’re building something a bit bigger, like plumbing – the infrastructure everyone needs but people don’t like to think about. “Spreadsheets of shame” is a great example of a plumbing problem. It’s not sexy; it’s deep under the surface of a business, but solving it is a must. It takes sturdy, reliable work, and it’s work that people will pay for.
We’ve done that for a lot of our users, but one that sticks out to me is Typeform. The business needed a global billing solution that integrated with its existing systems and could offer customizable pricing. By integrating Stripe Billing, they could create new pricing plans swiftly, save time on their tax and financial reporting, and benefit from this tooling across the markets globally.
Sar: Much of what might appear as accounting shenanigans by startups could be unintentional outcomes of feature gaps in their financial stack and lack of know-how. What do you think?
Suzanne: Founders don’t start companies to become accountants. We work deliberately to solve the complexity. Japan-based startup Tete Marche is a great example of this. They saw an opportunity to grow their revenue by selling their analytics tools as a subscription. They couldn’t afford to divert engineering resources to create a billing system. Stripe Billing automated their subscription payments – including managing customer contracts – and they went live less than a month from the start of development.
We have heard that founders are primarily concerned with strategic revenue growth and compliance – filing taxes to start and later on having clean books to raise money/take out loans. When their recurring billing platform does not provide sufficient reporting and analytics, it can result in many accounting shenanigans (i.e., wrestling spreadsheets for both analytics and revenue/fee reports).
Another concern founders raise is how SaaS metrics don’t seem to tie back to revenue report numbers. The most common question is, “why does my MRR differ from my monthly revenue?” It’s because MRR as a metric smooths over income discrepancies that can arise in daily operations, which means you can’t use it as a reportable metric in many cases. There’s an opportunity for education here: innovating with auditing experiences that bridge analytics numbers with accounting numbers.
Sar: What’s the strongest case against outsourcing revenue operations to a player like Stripe?
Suzanne: The only argument I understand, having been a founder myself, is that it’s comforting to have the engineering team building your in-house systems down the hall. But I also know it is very easy to underestimate the time and resources it takes to maintain those self-built solutions as your business grows. It’s not worth the superficial comfort of having your billing engineers close by.
Someone has to grow these systems as a business adds complexity. It almost conflicts your business with itself — you’re succeeding and want to keep growing, but you can’t for fear of a significant infrastructure failure. More users, new revenue streams, and compliance with local regulations around the globe – all require more resources. By outsourcing revenue operations to a provider like Stripe, founders only have to worry about iterating on their product and growing the business.
Sar: Compliance is an underrated benefit of not building an in-house recurring revenue management system. Talk about the common pitfalls you have seen startups face through that lens.
Suzanne: Compliance is often an afterthought when you’re a founder just starting by selling your product locally. As you expand into new markets, compliance quickly becomes an important obligation to get right and a costly burden to get wrong. Businesses need to follow different regulations for customer authentication, e-voicing, and sales tax collection, and that’s on top of ensuring the core product is strong. The consumer payments experience is familiar and intuitive.
Businesses need to make compliance a priority from the get-go so they stay ahead of the compliance curve. The easiest way is to use software tools that manage compliance as you expand.
Not thinking about tax compliance is one of the biggest pitfalls of scaling. Digital goods are subject to sales tax in over 130 countries, and the rules are constantly changing. Having tools that track automatically means businesses can save time and avoid the costs of non-compliance that they can’t afford in a downturn.
Sar: What user problems keep coming up in your discussions with your team about helping your customers manage a subscription business?
Suzanne: A big one is an involuntary churn – when payments fail because of expired cards, insufficient funds, or billing errors. Nearly 25% of revenue churn is involuntary, and it’s frustrating to lose out on this revenue because, in many cases, involuntary churn is avoidable, and the consumer often wants to avoid it just as much as the business.
Our billing software uses machine learning based on hundreds of billions of transactions to retry payments at optimal times. That feature alone recovers 14% more revenue than sending manual payment retries. Automatic reminders and self-serve customer interfaces also help eliminate churn by helping to ensure customer payment methods are up-to-date.
62% of businesses we surveyed see reducing churn from repeat customers as a “must-have” or “strong priority” for their business in 2023. And rightly so: with the right tools, it is one of the most powerful ways for businesses to make more money without lifting a finger, even in the face of economic headwinds.
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