PayPal Mafia

This is the final post in a four-part series of startup visualizations built by the students of Jay Rosen’s Studio 20 journalism program at NYU. The first post in the series  introduces the tool and maps out Silicon Valley’s “first family,” the Fairchild Mafia. The second post maps out Larry Ellison and the Oracle Mafia. The third post maps out Marc Andreessen and the Netscape Mafia.

Click here to see every startup that sprung out of the PayPal Mafia

(startup descriptions pulled from Crunchbase)

[Visualization built by Simran Khosla, Jesse Kipp, Nuha Abujaber, and Jonathan Soma]

Is your company or a company you know missing? Click here to submit your information and get on the map!

Each mafia we’ve covered, from Fairchild to Oracle to Netscape, has spawned great companies. But there’s something uniquely special about the PayPal Mafia. Despite the importance of establishing an imperfect yet workable payments infrastructure on the Web, there’s a good argument to be made that the financial and cultural impact of the companies PayPal spawned far outstrips that of PayPal itself. Maybe it’s because it’s the first Mafia to arise after the Internet had been fully established. Maybe it’s because its members still kept very close ties with one another, even when working in fields as divergent as spaceships and social media.

But whatever it is, it’s what happened after PayPal that’s really interesting. As a result of the company’s sale to eBay, its founders and principals became hugely rich. This allowed them to chase after even more ambitious ideas, like building electric-powered sports cars, jumpstarting the video revolution on the Web, and taking social media from a niche field dominated by college students to a worldwide phenomenon. And that’s what makes PayPal perhaps the most convincing proof of the startup root theory: The luminaries behind PayPal accomplished their greatest work not when concentrated at one company, but at separate companies helping each other out as investors and advisors. If Oracle is the Beatles, spawning solo acts that were impressive but never as good as the original, then PayPal is more like John Mayall & the Bluesbreakers, a decent band that helped spawned the careers of Eric Clapton, Cream’s Jack Bruce, the Rolling Stones’ Mick Taylor, and three members of Fleetwood Mac.

So how did it happen?

In 1998, Max Levchin, Peter Thiel and Luke Rosek started the company that would become PayPal, Confinity. They took the PayPal name after merging with Elon Musk’s X.com. Bringing payments into the digital age was no easy feat; PayPal faced many of the same challenges the bitcoin enthusiasts go through today, like dealing with fraudsters and money launderers.

It was also an expensive feat. According to early employee Eric Jackson, PayPal was burning through $10 million a month in 2000. Nevertheless, it was also growing exponentially fast, having hitched its wagons to eBay’s booming business. Finally, in 2002, PayPal sold to eBay for $1.5 billion. Depending on who you ask, it was either a shrewd exit that made millionaires out of its employees during a time of great upheaval in the Valley or “the worst tech decision in the last ten years.”

Could the PayPal Mafia had made more money had they stuck it out? Maybe. But think of what we could’ve potentially lost: Steve Chen, Chad Hurley, and Jawed Karim’s YouTube. Elon Musk’s Tesla and SpaceX. PayPal executive Jeremy Stoppelman founded Yelp, which came out of an incubator run by Levchin. Thiel (an investor in PandoDaily) became the first investor in Facebook. Reid Hoffman founded LinkedIn and made a series of prescient bets on social media, going so far as to buy all of the core social media patents so they couldn’t be used against this generation of companies. David Sacks founded Yammer. Keith Rabois made key investments in YouTube, Eventbrite, Palantir, and served as COO at Square until his role came to an unceremonious end. Roelof Botha became a partner at Sequoia Capital where he sits on the board of Eventbrite, Square, Tumblr, and many others.

And they did it all by helping, not fighting, one another. None of our Mafia visualizations is more tangled and convoluted than the PayPal one. And while it’s hard to prove this, I think that’s one of the biggest reasons the PayPal Mafia has experienced as much success as it has. Yes, these people are talented, smart, and hardworking. But more importantly, they know how to work together, as opposed to the Oracle Mafia which spawned feuds and infighting and threats to crush one another.

If there’s a lesson to be found here, it’s that there’s plenty of innovation and money to go around in Silicon Valley, and that the best discoveries happens when egos are set aside.

[Illustration by Simran Khosla]