In addition to essentially founding viral marketing, PayPal also led the way in platform strategy by working off of eBay’s foundation. Focus was also put on agility, which helped PayPal outmaneuver eBay on their own platform. They made it a priority to hire people they wanted to work with rather than the people with the best pedigree. They were far from the established Silicon Valley elite.įrom the beginning, Thiel and Levchin were more than partners, they were friends. The name PayPal Mafia was coined not just because of the company’s hold on the digital payment market, but because the founders were outliers. In many regards PayPal has become the model for today’s startups in Silicon Valley, including powerhouses like Facebook. The strategy was put into place partly due to PayPal’s non-existent marketing budget, but it ended up producing massive results that the founders themselves never could have predicted.Īgility and Camaraderie That Became the Silicon Valley Startup Model This is one of the earliest instances of using viral marketing to get your existing customer base to do most of the lead generation. Without an account they couldn’t get their money, which is good incentive for signing up. If a person was emailed funds but didn’t yet have a PayPal account they were prompted to do so when they got the alert that money was sent.
Emailing money to someone was a feat for that time, but PayPal also figured out a way to increase their membership through viral marketing. In a lecture at Stanford University Musk revealed that it only took his X.com team one day to create what is arguably one of PayPal’s most powerful features – emailing funds.īut the genius didn’t stop there. The Founders Thought the Biggest Feature Was Just a BonusĪs with many companies throughout history, a feature that the founders didn’t think was the most impressive ended up being a game changer. In just four short years PayPal went from being non-existent to being the world’s premier online financial service. Four months later eBay bought out PayPal for $1.5 billion to make it an official part of their service offerings. On the opening day of their IPO in February 2002, shares went from $13 each to $20.09 by close of business. Even eBay itself couldn’t compete with PayPal’s technology. Eventually two thirds of PayPal transactions were happening on the eBay platform. With the robust financial infrastructure of X.com, PayPal was able to bypass the tokens and deal directly with monetary transactions. The company was re-named PayPal, and Musk became the CEO. A few big things happened after that fateful merger. X.com was a service that combined all of a person’s finances online and included email transfers of money, stocks or mutual funds. Musk had just sold his online ad company Zip2 for $300 million and was looking to make waves with virtual finance products. In a year’s time the company gained 1 million users and people began using Confinity to exchange funds for products on eBay.Ībout this time Confinity was acquired by Musk’s company X.com. Shortly after in 1999 one of their engineers developed a process for sending money via email (more on that later) through the use of tokens, and the true essence of the business was born. Soon after the two began working together on digital wallet technology for PDAs, which led to the formation of their company Confinity. It all began in 1998 when Levchin went to see Thiel give a guest lecture at Stanford University. Max Levchin, Peter Thiel, Luke Nosek, Elon Musk, David Sacks and Reid Hoffman are the six key founders that created the world’s largest online payment system. PayPal is Proof Good Ideas Gain Traction Quickly Here at Keller Ink, we thought the advice in this short video of Elon Musk provides budding entrepreneurs with great tips on starting a business.
The experience that each founder gained in their involvement with PayPal and subsequent businesses has provided them with a tremendous amount of business knowledge to share. In Silicon Valley the name is synonymous with the success of PayPal’s six core founders and exemplifies how unconventional the company’s founding was after the dot com bust. It sounds much more ominous than it actually is.
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