The 21st century has been the age of the ‘dot com bubble’, the time of digital innovation and internet entrepreneurs.
The famous Silicon Valley in San Francisco is a breeding ground for tech billionaires such as Mark Zuckerberg, Steve Jobs and Elon Musk.
Central to the area’s many success stories is PayPal. Still one of the most popular online payment methods in the world, the firm led the way in internet transactions early on, which led eBay buying them for $1.5 billion in late 2002.
The story behind its incredible development, and the people behind it, is fascinating, and has led to a lasting legacy on the internet that some people refer to as the ‘PayPal Mafia’.
It’s a legacy that forms a ‘Who’s Who’ of billionaire entrepreneurs, with so many of today’s ‘unicorn’ companies able to trace their ancestry back to the early days of PayPal.
Here’s a closer look at how it all happened, and how it continues to influence the internet as we know it today.
A star is born
What do Germany, Poland and Ukraine all have in common? It may not be an obvious link, but they all provided a co-founder of the biggest payment platform in history.
It’s possible the trio in question weren’t aware of what they were going to achieve when they first met in 1998. Peter Thiel (Germany), Luke Nosek (Poland) and Max Levchin (Ukraine) simply wanted to market a service that transferred money between PalmPilots, one of the first popular handheld computers.
For this purpose, they formed Cofinity, Inc. and it was from this enterprise that they honed the idea of a payment product that could be used on any type of internet-friendly device — Thiel brought a business prodigy by the name of Kenneth Howery on board and, in 1999, PayPal was born.
Enter Elon Musk. His X.com agreed a merger with Cofinity in early 2000, and the success of the rapidly-growing PayPal soon consumed the two enterprises until they merged under its name later in the year.
Musk was fired by the company’s board after a power struggle with Thiel in the firm’s early days, but his financial backing no doubt helped provide the springboard for PayPal to be purchased by eBay just a couple of years later.
$1.5 billion was the accepted offer from the retail giant. Not bad for an idea that was barely three years old.
PayPal’s unstoppable expansion
Following eBay’s purchase of the group, the startup went from strength-to strength. It dominated eBay’s mammoth payment market, dealt in 25 different currencies and boasted 100 million users.
Paypal’s expansion was unstoppable, and it soon outgrew eBay and moved into different markets. The variety of ways to use the platform was now bigger than ever before: users could basically pay for anything online. They could buy clothes, transfer money to friends, make deposits in online casinos or book flights. An internet without PayPal was now almost unthinkable.
With the payment platform now a major player in its own right, PayPal and eBay decided to separate in 2014, and many of the firm’s original founders had gone onto new things.
Christened the ‘PayPal Mafia’, these entrepreneurs had a huge influence within Silicon Valley and many of these ventures have become Unicorn companies themselves.
The PayPal influence today
The sheer size of the PayPal founder’s sphere of influence is astonishing, and often features several of them crossing paths again to form huge projects.
Often, the projects that the founders started after they left PayPal led to even bigger riches. Perhaps the most notable individual case is Peter Thiel’s contribution to Facebook. His clever Angel Investment of $500,000 for a 10.2% stake in 2004 rocketed along with the platform’s success, leading to him selling the majority of his shares for just over a billion dollars in 2012.
But even this doesn’t match up to the sheer power of the Founders Fund. Set up by Thiel, Howery and Nosek in 2005, the group used its capital to invest in a litany of start-up enterprises that would go on to have incredible success. AirBnB, Spotify, Lyft and Stripe are just some of the ventures that shot to global fame thanks to their input, while Elon Musk’s SpaceX benefitted from their investment along the way.
By 2016, the Fund commanded more than $3 billion of capital and an almost universal influence: if you booked something online at this point, they probably had something to do with it.
That’s not to forget the other founder, Max Levchin. Taking his $34 million PayPal stake, he launched Slide in 2005; a startup making photo-sharing software for social media sites. This venture was absorbed by Google in 2010, with Levchin receiving $182 million for his efforts.
But the above names are just the PayPal founders: what of the crucial first employees who profited from the company’s incredible rise and made a further impact on the online world?
Well, how about the founders of YouTube? Steve Chen, Chad Hurley and Jawed Karim were all PayPal employees when they came up with the idea of the pioneering video-sharing platform. Yu Pan, YouTube’s first ever employee, also transferred over from PayPal.
They combined their know-how to launch the site in 2005 and the young founders earned a fortune when Google bought them out for $1.65 billion the following year.
Russel Simmons, PayPal’s Lead Software Architect, formed Yelp with colleague Jeremy Stoppelman in 2004. Focussing on online crowd-sourced business reviews, this venture also attracted enough interest that Google (yet again) were interested in taking them over. The pair decided to go it alone, however, and the company’s website contained over 192 million reviews by 2019.
It doesn’t stop there. LinkedIn founder Reid Hoffman served as Paypal’s Executive Vice President when they were sold to eBay, former director Roelof Botha is one of the key people at $1.4 trillion investment firm Sequoia Capital, while PayPal product manager Premal Shah has injected over $1 billion of his fortune into helping entrepreneurs in low-income countries.
A digital lineage
Just as it’s claimed that around 16 million people can claim to be descended from Genghis Khan, it seems that most of the internet can trace its lineage back to PayPal. If you want to watch a video, book accommodation, find a job or even read about the mission to put the first humans on Mars, the chances of a former PayPal associate being behind it are very high indeed.
And that’s something that maybe not even the bright, ambitious minds of the PayPal founders could have imagined when they launched their first product all those years ago.