What does Tesla, LinkedIn, and youtube have in common?
Besides all of them being tech companies,
they were all founded by the PayPal Mafia.
In fact, if you just take a look at the silicon valley, you will find out that the PayPal mafia was involved in almost every major company,
starting from Facebook, Instagram to Uber, Lyft, Airbnb and even Reddit.
This small talented group of people literally
shaped the future of the internet.
And in this article, we are going to take a
look at how on earth did so many super talented people ended up working together?
How did they all end up becoming billionaires? How powerful is this mafia today?
and why every single one has left Paypal?
What is mafia?
When we talk about Mafia, we usually mean,
a violent gang, usually when few families join forces and take control over some illegal
businesses.
First of all, there isn’t much competition
because its illegal and not everyone can do
that and secondly, even if there will be competition, you don’t get rid of your competitor by improving your product or service rather, you get rid of them in a straight and literal meaning.
However, as the new century was about to begin that brought with it an innovation that had the potential to complete reshape humanity, a small group of people took advantage of it and become the PayPal Mafia.
The Story of The PayPal Mafia.
Elon Musk Zip2 and X.com
In the late 1990s when the internet was booming, when investors were throwing money at any company that had .com in its name, Elon Musk dropped out and moved to the United States to start Zip2 with his brother Kimbal Musk, with the money he successfully raised from a small group of angel investors.
Although the company was quite successful
and went to obtain contracts with giants such
as the New York Times, The board turned down Musk to become the CEO of the company so he left with 22 million dollars when it was acquired by Compaq to start X.com in 1999, an online financial service company.
He was so much into this company that he paid a million dollars just to obtain the name x.com.
However, he wasn’t the only one with this brilliant idea to start online banking. It’s the late 1990s, everybody was trying to turn any service online and make a fortune.
The Origin of Confinity
A year before that (1998), Peter Thiel together
with Max Levchin who moved to the US right
after the fall of the soviet union founded Confinity.
The goal was to make money transfers simple
and easy online.
The prime target were the PDA users, it was
basically the iPhone of that time, a little digital assistant. However, later on, they realized that they could sync the software with Email and the Web, so with or without a PDA, the user could transfer money. And they named this product as PayPal.
That’s how PayPal was born!
Transferring money today seems such a basic
idea, however, in the 1990s, that wasn’t the case, the ability for anyone to transfer money around the globe was something revolutionary.
The rivalry between the 2 companies was fierce
(Confinity vs x.com). To boost up their user
numbers, Confinity started offering 10$ bonus
signup and a 10 dollar referral bonus for each new user.
It might seem like X.com would offer exactly the same to stay competitive, however, they
raised that number and offered a 20 dollars
bonus for each signup and 10 dollars for each
referral signup.
You are probably already guessing how it went for both companies. They were bleeding cash and it was only a matter of time before one of them would go bankrupt.
But regardless, it was a brilliant idea, because
no one would mind free money, so the number
of users grew dramatically. In the next 3 months, PayPal had already attracted 12 thousand users.
eBay
However, what really made PayPal so successful was eBay. It was kicked off a few years earlier and already was at the top of the internet at that time.
Despite its dramatic growth, the only way to pay for things was through checks, which were extremely inconvenient. that’s why they chose to integrate Paypal into their system which made Paypal even more popular.
X.com
On the other side, Musk was in a little trouble
with X.com because his key partner Harris
Fricker resigned and many important engineers left with him.
Unlike Confinity who only focused on transferring money online, X.com was an actual bank with an appropriate license, but of course one of their major services was transferring money to one another which made the two companies fierce competitors.
The two companies fought to gain eBay users
but at some point, they realized that this
competition will hurt them both, On one side
PayPal was much more popular than x.com,
but it was bleeding cash while x.com had
plenty of cash around which pushed the two
companies to merge under the name Paypal.
This decision later came to be extremely crucial.
The Burst of .Com Bubble in 2001
For the last 5 years, investors were blindly
throwing money at every company that added
.com in their name, so next year, in 2001, the bubble burst and most internet companies literally went bankrupt one after another.
and if it wasn’t for that merger, Paypal or x.com individually wouldn’t survive the crises.
PayPal Mafia
Paypal was already struggling before the crises, the two teams couldn’t work together efficiently and the future of the company was quite blurred.
Bill Harris was the first CEO, then he was replaced by Musk, then when Musk was on a
vacation, he was replaced by Peter Thiel.
The company was going through a lot of instability.
Despite the struggles, in 2002, PayPal went
public and generated 61 million dollars.
Shortly after the IPO, eBay made them an offer they couldn’t refuse, 1.5 billion dollars for the entire company in July of the same year since PayPal became the payment method used by a majority of eBay users.
But eBay changed PayPal to its core to the point where all the founders left, but they didn’t just leave but founded some of the innovative companies in the world.
Steve Chen, Chur Hurley and Jawed Karim.
who kick-started Confinity with Peter Thiel went to start an online video sharing company that they named YouTube in 2005.
The service took off incredibly fast and by 2006 google made them an offer they could
not refuse and purchased Youtube for 1.65
billion dollars.
Reid Hoffman
who was on the board of directors of Paypal and the executive vice president started LinkedIn 2002, the first business-oriented online social network.
Today LinkedIn has almost 600 million users
and operates all over the globe. and in June
of 2016, Microsoft proposed to acquire LinkedIn for $26.2 billion in cash, an offer they couldn’t refuse, that also put Hoffman on Microsoft’s board and made him a billionaire.
Elon Musk
And then there is Elon Musk, who doesn’t need an introduction. Since he was the biggest shareholder, he earned 250 million dollars
from this deal, but was only left with 180
million dollars after taxes.
His ambitions were beyond this world, anyone
else would start maybe a company and leave
the rest on an investment fund, but not musk,
he started a rocket manufacturing and space
transportation company with a hundred million dollars right after exiting PayPal to colonize Mars and make humanity multi-planetary species.
He Invested another 70 million dollars in
tesla, an electric car company. And the last
10 million dollars he invested in Solar city,
to improve solar energy technology.
Despite that SpaceX and Tesla almost went
bankrupt, today they are at the top of the world.
He also launched Neuralink, a neurotechnology company that develops implantable brain-machine interfaces. And the boring company, to dig tunnels underground to reduce traffic. In fact, he started the company because he couldn’t take the LA traffic any more.
Peter Thiel
who was the CFO at PayPal started a hedge fund — Clarium Capital — with the 55 million dollars he has earned from the PayPal deal. He became the first outside investor in Facebook. He invested 500 thousand dollars for 10.2 percent equity.
Thiel was not only actively involved in Facebook’s day-to-day running. but also helped the company to survive the 2008 crush and when Facebook went public, he sold most of his shares and became a billionaire.
Jeremy stoppelman
Former vice president of Paypal Jeremy Stoppelman went to start Yelp with few other PayPal employees.
Its crowd-sourced review online service that
has a market value of 2.5 billion dollars and as 2017, Yelp reported having a monthly average of 150 million unique visitors.
The rest of the team who worked at PayPal
went to start multiple different startups that became eventually multi-billion dollar companies.
But besides that, they were early investors in multiple companies that shape our reality today, Uber, Airbnb, Instagram, Dropbox, Quora, Evernote, Spotify, Reddit, Pinterest, Lyft and many others.
These group of incredibly talented people
later came to be known as the PayPal mafia.
They are not some kind of an organization
that works together, but more of a network
of talented people.
I hope you guys have enjoyed this article, give
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