Stripe
Wants to Buy PayPal. The Real Prize May Be Hiding in Plain Sight
Stripe’s $53 billion bet reveals a
brutal truth about the tech Industry.
EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V
AND CHICAGO HIGH TECH INVESTORS @TULLMAN
Jul 21, 2026
One of the oldest ideas
in the technology world is that most of the competitive races among new
entrepreneurial entrants that are proposing to provide various novel products
and services will eventually resolve themselves into markets and verticals
dominated by one (or at most two or three) very large and successful players
while the rest of the also-rans and wannabes share the crumbs left on
the table, until they eventually fold up their tents and pack it in.
It’s a cyclical
circumstance in the tech industry and we’re seeing it again today in the AI frontier engine competition with the clear
dominance of a few major platform players. Technology is a “winner take all”
world driven by several practical and structural considerations that typically
drive this kind of concentration conclusion. Some of the key contributing
factors to this recurring outcome: demonstrated economies of scale,
market-dictated centralization and standardization requirements, the herd
mentality of large technology purchasers—believing that you can’t go wrong or
lose your job if you’re buying what everyone else is using—and the power of Metcalfe’s Law, which describes and defines the
exponential growth characteristics of networks.
And, of course, when you
have a passive and forgiving regulatory environment and an utter lack of
enforcement of antitrust laws aided, abetted and actively encouraged (if not
directly ordered and demanded) by an easily bribed and corrupt administration, it
becomes easier and easier to consolidate even traditional industries into the
hands of a few powerful players aiming to crush their competitors as we see
every day now in the broadcast, entertainment and media sectors. The message to
the insiders and the sharks is pretty clear—the gloves are off, join the crooks
in the White House in grabbing whatever you can, and worry about the
consequences way down the line—if ever.
So, it comes as no great
surprise that PayPal, which really started the whole online payments business
in 1998, is once again being tossed around and targeted by Stripe. Founded more
than a decade later in 2010, Stripe has just made an offer to buy PayPal for
about $53 billion, about one third of Stripe’s most recent valuation. More
interesting, in the manner of the minnow swallowing the whale, PayPal handled
over $1.8 trillion in payments, which completely dwarfs Stripe’s current
operations. But with its stock under tremendous negative pressure, PayPal makes
a very attractive target for a business like Stripe, which has been trying to
consolidate and control the overall e-commerce processing space since its
inception.
PayPal was bought in
2002 by eBay and pretty much moldered in the shadows there until it was spun
off as its own entity in 2015. Earlier this year, the CEO was fired, the stock
being down more than 25 percent, and, more recently, PayPal split itself into 3
divisions—one of which is its rapidly growing Venmo division (acquired by PayPal
in 2013) which processed about $300 billion in payments last year. Stripe—which
in its own operations is clearly best of breed—certainly sees the Venmo
division as a great add-on.
Of course, this would
represent a very substantial contraction of the overall consumer payment space
even though Apple Pay is growing quickly and other programs like Zelle are also
gaining some modest traction. In the old pre-Trump days, this kind of a proposed
deal—especially on this scale—folding together the two leaders in the space
would be highly suspect from a regulatory standpoint. But in today’s laissez
faire environment, you secure the Orange Monster’s blessing (often under the
table), and then this kind of deal simply becomes business as usual.
In all fairness—and
putting aside the fact that this smells like another Lutnick self-dealing
special that we’ll only learn about a year from now—the truth is that PayPal
may have committed the cardinal Silicon Valley sin of becoming boring and
passé, unduly complicated in a world seeking speed, convenience and ease of
access; and ultimately being perceived as behind the times, especially when
compared to the simplicity of players like Stripe. While we might gripe about
the concentration issues, the fact is that PayPal largely brought all this
attention and grief on itself. It had a diamond in Venmo buried within a
corporate bureaucracy that should have been exploited, promoted, and
accelerated. Instead, in a final fit of accelerating its own demise, PayPal
split itself into distinct parts that highlighted and identified the old news
and the new value embedded within. This wasn’t lost on some of the bankers
whose earliest analysis and comments were around the idea that Stripe might
very well be able to make more profit and drive more growth for Venmo than
PayPal ever could at this point.
Joseph Schumpeter may
have died in 1950, but his doctrine of creative destruction lives on. Founders
and market leaders aren’t entitled to persist indefinitely and it’s the regular
emergence of new entrepreneurial companies with better technology, ideas and
resources that eventually spurs change, innovation and growth. Sometimes it
doesn’t hurt in the long run to be the second mover rather than the first.
