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    Home»Industry Insights»Paypal & The Legend of the PayPal Mafia
    PayPal and the Legend of the PayPal Mafia e
    Industry Insights

    Paypal & The Legend of the PayPal Mafia

    SnapMunkBy SnapMunkMay 2, 2015Updated:January 14, 2017No Comments6 Mins Read
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    The Incredible PayPal Story

    PayPal is one of the first and most successful online payment processing companies in the world. The story of PayPal is one of unexpected success, and its journey towards stardom has been nothing short of tumultuous particularly in the early stages. The men who stirred the revolution have moved on to greater things that continue to shape the world. The group, often referred to as the PayPal Mafia, include many of today’s successful entrepreneurs such as Peter Thiel, Elon Musk, Reid Hoffman and Max Levchin.

    Confinity and X.com

    PayPal started as Confinity in December 1998, founded by Peter Thiel, Max Levchin, Ken Howery and Luke Nosek. As a security software development company, Confinity launched a money transfer service in 1999 and christened it PayPal. It was around the same time that Elon Musk co-founded X.com in March 1999 as an email payment and online financial services company.

    The aim behind Confinity’s money transfer service was currency that wasn’t shackled by governmental controls. In just 15 months, after partnerships with eBay transactions and venture capital funding, PayPal experienced a massive surge in popularity peaking at 1 million users. Musk began realizing the potential of Confinity’s money transfer feature and decided to merge X.com with Confinity in March 2000. This led to disagreement with the then X.com CEO Bill Harris leading to him leave the company in May 2000. Following the merger, Musk decided to concentrate on Confinity’s PayPal money transfer service and renamed the merger “PayPal” in 2001, terminating all other Internet banking operations of X.com.

    Hacking, Bans and Eventual Victory

    Musk capitalized on the astronomical success of PayPal, but the company wasn’t without its controversies. It began attracting hackers en masse who targeted the site for money laundering and frauds. The governments of various states stepped in, with New York, California and other states fining PayPal for violations. Some states, including Louisiana, banned PayPal altogether. However, the company introduced increased security measures as a result and the bans have long since been revoked. PayPal’s initial promotion, providing $10 for new users and bonuses for friend referrals, would have helped it to gain popularity initially, but the company’s user-friendliness, efficiency and promise of improved security features soon took over.

    eBay Gets Hooked

    The company has managed to regain trust since the security issues, and it was proved by its rising market share right up to the point when it became the default payment service online. Buyers preferred PayPal even when online merchants or retail sites had their own preferred payment gateway. More deals were getting done through PayPal and online merchants began accepting it and making it their default payment service. One of these was eBay.

    eBay’s first step in incorporating online payments for its online auctions was purchasing Billpoint in 1999, making it eBay’s official payment system. It was called eBay Payments but its functionality was significantly downsized, making it appropriate for only eBay auctions. That’s where PayPal gained the advantage. It became the choice of over 50% of eBay users, and by February 2000 there was an average of 200,000 auctions every day that advertised PayPal while Billpoint could only boast around 4,000 auctions. PayPal auctions kept growing fast and soon PayPal was taken public and was listed in 2002 at $13 per share. This helped the company generate more than $61 million.

    eBay finally acquired PayPal in October 2002 and removed the Billpoint service, retaining PayPal. This brought together the strength of the world’s largest online marketplace and the web’s leading payment system.

    The eBay takeover finally turned the limelight on the “PayPal Mafia”.

    The Unconquerable ‘PayPal Mafia’

    The PayPal Mafia are the 25 original employees who shaped the PayPal company and made it the popular service it is today. With the acquisition by eBay, the startup culture which they were used to began to disappear. Finding it hard to adjust to the more formal and corporate eBay culture, they left PayPal but stayed connected in business circles.

    Staying Connected Post-PayPal

    Most of these people had studied at Stanford at some point and later established 7 unicorn companies – LinkedIn, Tesla Motors, SpaceX, YouTube, Yammer and Yelp. Two of these, LinkedIn and Tesla Motors, have even crossed the 10 billion dollar mark. In 2007, Fortune Magazine featured a photo of these former PayPal shapers in gangster attire in one of its issues. This made the “mafia” term even more popular.

    The members of the PayPal mafia have been successful at nearly everything they stepped into. The success is often attributed to the hiring culture that they learned from PayPal, and the sheer amount of technical learning that they went through there. Other reasons include the diversity of their skill sets, and more importantly the social bonds and camaraderie they forged among themselves in the good and bad times at PayPal amidst a fiercely competitive environment.

    Elon Musk and Tesla Motors

    One of the most illustrious of the PayPal Mafia is Elon Musk, an entrepreneur who seemed to be destined for success even before his PayPal days. Of the many companies Musk co-founded, or was involved in, Tesla Motors is among the more popular ones since it almost single handedly began the transformation process of the automobile industry with its user-friendly and desirable electric vehicles.

    The company designs and manufactures electric cars as well as electric power train components. Its Tesla Roadster is the first sports car solely powered by batteries, while the Model S is an electric luxury sedan. Model X and Model 3 are upcoming models of the company. Tesla also supplies lithium-ion battery packs and other electric power train components to Daimler and Toyota. One of the most notable facts about Tesla motors is that the company opened up all its patents to its competitors in an effort to increase the adoption of electric vehicles.

    Reid Hoffmann’s LinkedIn

    No professional network is complete without LinkedIn. This social network has become such an integral part of corporate culture, and the brain behind this is Reid Hoffmann, former executive vice president of PayPal and one of Facebook’s early investors. The founding team also includes other former employees of PayPal and Socialnet.com. Since its launch in May 2003, LinkedIn has grown to boast over 259 million acquired users spread out in over 200 nations and territories as of June 2013.

    LinkedIn rose in popularity primarily as it allowed users to create profiles and connections that formed the basis of professional relationships. A user can invite anyone to become one’s connection, even if the individual is not on the network.

    With their investments and startups, the PayPal mafia members have transformed the economy of Silicon Valley, and these startups have been some of the most influential and defining features of our times. The “mafia” is still at large and some of the members have moved on further ahead, but they are continuing to influence the world.

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