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PayPal Mafia: The PayPal Mafia Members In A Nutshell
The PayPal Mafia describes a group of former PayPal employees and founders who have since become involved with other tech companies. While most know SpaceX founder Elon Musk’s association with PayPal, the company also has links with YouTube, LinkedIn, and Yelp, among many others. In addition to founding these generation-defining companies, the members of the PayPal Mafia are some of the richest men in Silicon Valley.
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to found X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass manufacturing electric car maker.
Elon Musk has made most of his money by investing in ideas and companies he is passionate about. After eBay acquired PayPal for $1.5 billion in 2002, Musk used his personal wealth to fund his new ventures: Tesla and SpaceX. Most of Elon Musk’s wealth comes from Tesla, as he’s the major shareholder for the company. Making Elon Musk’s net worth well past the hundred billion-dollar mark.
Peter Thiel
Often referred to as the “Don” of the PayPal Mafia, Peter Thiel is one of the original co-founders of PayPal.
Thiel earned $55 million from his 3.7% stake in PayPal after it was sold to eBay, after which he created the hedge fund Clarium Capital and became the first outside investor in fledging Facebook. His original $500,000 investment would now be worth approximately $9 billion, though the billionaire reduced his holdings by 81% in 2020.
Thiel is also the co-founder of Palantir Technologies, a software and data integration company with clients in the United States Government, military, intelligence, and police.
Jawed Karim
At PayPal, Karim was responsible for implementing the company’s real-time anti-fraud system.
Once his tenure ended, Karim founded YouTube with former PayPal colleagues Steve Chen and Chad Hurley. Karim continued to act as an advisor while studying computer science at Stanford University. Once YouTube was acquired by Google, Karim sold his shares which at the time were worth $64 million.
In 2008, Karim founded Youniversity Ventures with early PayPal investors Kevin Hartz and Keith Rabols. The company helps students and graduates develop viable business ideas.
Jeremy Stoppelman
Jeremy Stoppelman had a very early role at PayPal, joining the company as an engineer while it was still known as X.com. He eventually attained the title of Vice President of Engineering.
Stoppelman was another member of the PayPal Mafia to benefit from the eBay acquisition – at least indirectly. He founded the online review site Yelp with former colleague Russel Simmons after contracting the flu and experiencing difficulty finding a good doctor.
Reid Hoffman
Hoffman joined PayPal as its COO in 2000, handling all external communications. At the time of the eBay acquisition in 2002, he was executive vice president.
LinkedIn is a two-sided platform running on a freemium model, where to unlock unlimited search and other features, you need to switch to a paid account. Acquired by Microsoft for $27 billion in 2016, LinkedIn made $5.2 billion in revenues in 2018 and nearly 630M members by October 2019.
In more recent years, Hoffman has been involved with philanthropic projects. He currently serves on the boards of microlending service Kiva and the social change organization Do Something. Hoffman is also associated with Endeavor Global, which identifies and supports entrepreneurs in emerging markets.
Blitzscaling is a business concept and a book written by Reid Hoffman (LinkedIn Co-founder) and Chris Yeh. At its core, the concept of Blitzscaling is about growing at a rate that is so much faster than your competitors, that make you feel uncomfortable. In short, Blitzscaling is prioritizing speed over efficiency in the face of uncertainty.
David O. Sacks
David Sacks joined PayPal in 1999 from the management consultancy firm McKinsey & Company.
As COO before the appointment of Hoffman, Sacks was responsible for project management, design, sales and marketing, customer service, fraud operations, and human resources functions. During his tenure, he grew PayPal revenue to 240 million per year, introduced business accounts, and expanded the platform into multiple currencies and over 80 countries.
Sacks has arguably the most diverse resume of any PayPal Mafia member. In 2005, he produced and financed the satirical comedy Thank You for Smoking. The following year, he founded the genealogy website Geni.com and Yammer, a social network and productivity tool for internal corporate communication.
Angel investment in technology companies is also a passion for Sacks, having been involved in the industry for two decades. Some of his investments include Airbnb, Eventbrite, Opendoor, Postmates, Scribd, Slack, and Uber.
Key takeaways:
The PayPal Mafia describes a group of former PayPal employees and founders who have since become involved with other tech companies. Elon Musk is perhaps the most well-known member.
Peter Thiel is one of the original co-founders of PayPal and is often referred to as the “Don” of the PayPal mafia. Jawed Karim, responsible for implementing PayPal’s fraud protection system, later founded YouTube with colleagues Steve Chen and Chad Hurley.
Former COO Reid Hoffman left PayPal after the eBay acquisition to found LinkedIn. David O. Sacks, also a former COO, has produced a movie and founded a corporate social network since his time at PayPal. Sacks is also a passionate angel investor.
Venmo is a peer-to-peer payments app enabling users to share and make payments with friends for a variety of services. The service is free, but a 3% fee applies to credit cards. Venmo also launched a debit card in partnership with Mastercard. Venmo got acquired in 2012 by Braintree, and Braintree got acquired in 2013 by PayPal.
Fintech business models leverage tech and digital to enhance the financial service industry. Fintech business models, therefore, apply tech to various financial service use cases. Fintech business model examples comprise Affirm, Chime, Coinbase, Klarna, Paypal, Stripe, Robinhood, and many others whose mission is to digitize the financial services industry.
Stripe is a payment processing platform making money based on the transactions processed. Stripe charges 2.9% per successful card plus 30 cents. As a SaaS business, Stripe offers Billing (Starter and Scale), enabling customers to schedule clients’ invoicing or charging to analyze the subscription revenues. Other services also comprise Connect, Radar, Terminal, and Atlas.
Coinbase is among the most popular platforms for trading and storing crypto-assets, whose mission is “to create an open financial system for the world” by enabling customers to trade cryptocurrencies. Its platform serves both as a search and discovery engine for crypto assets. The company makes money primarily through fees earned for the transactions processed through the platform, custodial services offered, interest, and subscriptions.
Zelle is a peer-to-peer payment network that indirectly benefits the banks’ consortium that backs it. Zelle also enables users to pay businesses for goods and services, free for users. Merchants pay a 1% fee to Visa or Mastercard, who share it with the bank that issued the card.
Klarna is a financial technology company allowing consumers to shop with a temporary Visa card. Thus it then performs a soft credit check and pays the merchant. Klarna makes money by charging merchants. Klarna also earns a percentage of interchange fees as a commission and for interests earned on customers’ accounts.
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