The PayPal mafia

Tuesday, November 20th, 2007

Jeffrey O’Brien describes the PayPal mafia, “the hyperintelligent, superconnected pack of serial entrepreneurs who left the payment service and are turning Silicon Valley upside down”:

During the past five years they’ve been furiously building things — investment firms, philanthropies, solar-power companies, an electric-car maker, a firm that aims to colonize Mars, and of course a slew of Internet companies. It’s amazing how many hot web properties can trace their ancestries to PayPal.

Besides Facebook and Slide, there’s Yelp, Digg, and YouTube. Thiel and Levchin, the don and consigliere of the mafia, figure that all told, there are dozens of enterprises worth a total of roughly $30 billion — and that value is growing rapidly, as evidenced by Thiel’s good fortune with Facebook.

This group of serial entrepreneurs and investors represents a new generation of wealth and power. In some ways they’re classic characters of Silicon Valley, where success and easy access to capital breed ambition and further success. It’s the reason people come to the area from all over the world. But even by that standard, PayPal was a petri dish for entrepreneurs. The obvious question is, Why?

Maybe it comes back to the early hires. After their first breakfast, Thiel and Levchin began recruiting everyone they knew at their alma maters. “It basically started by hiring all these people in concentric circles,” Thiel remembers. “I hired friends from Stanford, and Max brought in people from the University of Illinois.”

They were looking for a specific type of candidate. They wanted competitive, well-read, multilingual individuals who, above all else, had a proficiency in math. Levchin’s original idea for PayPal was to beam money between PalmPilots, but Thiel has a way of seeing the bigger picture.

A staunch libertarian, Thiel figured a web-based currency would undermine government tax structures. Getting there, however, would mean taking on established industries — commercial banking, for instance — which would require financial acumen and engineering expertise.

Thiel and Levchin also wanted workaholics who were not MBAs, consultants, frat boys, or, God forbid, jocks. “This guy came in, and I asked what he liked to do for fun,” Levchin recalls. “He said, ‘I really enjoy playing hoops.’ I said, ‘We can’t hire the guy. Everyone I knew in college who liked to play hoops was an idiot.’”

They wanted competitive, well-read, multilingual individuals who, above all else, had a proficiency in math. Hmm…

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