Adyen: The “Navy SEAL” Team of Payments

Adyen means “start over again”. In 2006, a group of entrepreneurs, including Pieter van der Does and Arnout Schuijff, founded Adyen. The name “Adyen” was chosen because the same group founded Bibit, a payment company, and after selling the company to Royal Bank of Scotland (RBS), they decided to start another payments company. Why? Pieter explains in this podcast,

“Our idea was to build in-house something that connects directly to the endpoint of payment and does not make a patchwork of systems. We believed that if you could make this product of the highest quality possible, then you’d be able to sell it to the best companies in the market. So we had a very unusual market entry strategy and a very ambitious plan - we know this market, we're going to build something that outperforms and we directly target the high-end.”

After bootstrapping the company for almost five years, Adyen’s founders raised their first VC round in 2011. Adyen also broke even in the same year, so it wasn’t like they were under any pressure which is perhaps the perfect time to raise money. As internet companies were in the gold rush to expand globally in the last decade and half, Adyen was ready to provide them the shovels of payments which can be incredibly complex even though it may appear relatively simple for the end consumer. The complexity of payments helped Adyen’s team as they had been involved with payments since the ‘90s and had very clear ideas and vision of what the internet scaled companies really need. One of their early backers labelled the founding team the “Navy Seal team of payments”.

While Adyen does not receive nowhere close to the adulation Silicon Valley’s darling Stripe gets from the press, this Netherlands based company processed €516 Bn of payments throughout the world last year, a whopping €212 Bn more than how much they processed in 2020.

Over the last month, I spoke with a couple of Adyen shareholders and interacted with several pseudonymous twitter accounts. I appreciate their help very much. Here’s the outline for this month’s deep dive:

Section 1 Adyen’s place in the payment complex: I briefly explained the payment value chain and how Adyen fits into this chain.

Section 2 Adyen’s value proposition and TAM: I discussed how Adyen crossed the early chasm, how it is able to take market share from legacy players, and how I estimated its TAM.

Section 3 Competitive dynamics against legacy players and fellow disruptors: I dissected competitors in two broad segments: legacy players and fellow disruptors and then elaborated how Adyen is positioned against them.

Section 4 Management and capital allocation: I highlighted Adyen’s approach to capital allocation and management philosophy of scaling the business.

Section 5 Valuation and model assumptions: Model/implied expectations are discussed here.

Section 6 Final Words: Concluding remarks on Adyen, and disclosure as well as a bit more discussion of my overall portfolio.

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