Pando

With Palantir's $20B valuation, how does Peter Thiel stack up against the rest of the PayPal mafia?

Billionaire vs. Billionaire

By Sarah Lacy , written on June 24, 2015

From The Venture Capital Desk

PayPal cofounders Max Levchin and Peter Thiel used to be intensely competitive with one another. They would race to solve math problems and occasionally race each other by foot. After they sold PayPal, they found themselves in another contest: Who would be first to become a billionaire?

[Disclosure: Thiel is a Pando investor via Founders Fund]

When I first got to know the two in 2006, Levchin had admitted defeat, in that contest at least. He was slogging away to build Slide-- which didn't do too shabbily, at least for a company whose product is no longer in existence. It was at one time valued north of $550 million and eventually sold to google for $228 million.

Meanwhile, Thiel made one of the earliest bets on Facebook, and very soon all that paper wealth would turn into actual money. He knew it, Levchin knew it, everyone knew it.

Much had been written about the insane financial success of the PayPal mafia, which seems to have had its tentacles in most successful consumer web and social media companies of the last 15 years. But a lot of the PayPal mafia has made their money as investors. Roelof Botha has become one of the top investors at Sequoia Capital, during a resurgence of the firm that has seen bets on Dropbox, Whatsapp, and Airbnb. Thiel, Luke Nosek and Ken Howery built Founders Fund. Keith Rabois is at Khosla Ventures, where he too lends a "co-founder" credit to companies from time to time.

But given all that investment success, the raw net worth of ex-Paypallers only tells one part of the story. It doesn’t tell us how successful they’ve continued to be as entrepreneurs.

It was reported yesterday that Palantir Technologies, an intelligence contractor co-founded by Thiel, is raising $500m at a $20bn valuation. As Buzzfeed put it, that makes it the third most valuable startup in the US.  

When it comes to second (and third) acts as company founders (or co-founders), how do other members of the PayPal mafia stack up?

Max Levchin: Ok, so Slide was ultimately a disappointment but kudos to Levchin for at least getting a far better outcome than competitors like Rockyou or iLike. Now Levchin is building two companies: Glow and Affirm: One trying to “disrupt” reproductive health and one trying to remake lending.

The jury is out on how either will do. They are certainly not the sexiest valley startups on everyone's lips, but Levchin is as intense as they come and he's playing to his strengths trying to solve big problems via data.

David Sacks: After dabbling for a while as a movie producer, Sacks started Geni which was supposed to be the first family social network and was ultimately a disappointment, selling to Israeli competitor MyHeritage. But out of Geni came Yammer which was one of the first “consumerization of enterprise” exits, selling to Microsoft for a cool $1 billion. It wasn't the largest PayPal mafia exit, but it was huge given the size of Yammer's business at the time. Moreover, it helped to create an entire category.

Scott Banister: It was Banister who first lured Levchin out to Silicon Valley and gave him his first place to crash. His company Ironport was one of the first exits for the mafia, selling to Cisco for a reported $830 million in 2007. 

Chad Hurley and Steve Chen: In the early days of the PayPal mafia hype, YouTube burned the hottest and brightest, selling to Google after only a year in existence for $1.65 billion. I'd argue YouTube has had one of the largest cultural impacts of any of the companies on this list, but as time has gone on what was once an outrageous sale price has seemed comparatively low. Then again, that was a different time and YouTube was an important first data point that consumer Internet companies could be worth big money, unleashing a torrent of funding and creativity.

Jeremy Stoppelman and Russel Simmons: Yelp grinded it out in the local space to outlast early competitors like Insider Pages and later seemingly existential threats like Foursquare and Groupon. While Simmons left the company years ago, Stoppelman has continued to run Yelp since its inception. Both Levchin and Benchmark's Bill Gurley have said he's one of the best CEOs in their portfolio.

But while Yelp is currently valued at $3.4 billion, it has struggled of late, as Kevin Kelleher wrote on Pando.

Reid Hoffman: One of the best angel investors of the PayPal mafia is also one of the top repeat founders. We all know the story of LinkedIn. You only have to look at Twitter to see how hard it is to be another social network in a Facebook world. But by early on building one of the best freemium businesses on the web, LinkedIn has carved its own identity as a public company. LinkedIn is currently valued at $27 billion-- and unlike Palantir's private valuation, that's real tradable money. And while Hoffman isn't the CEO, Linkedin has always been his baby with everything else coming second: he still spends more than half his time working at the company.

But the winner is…

Elon Musk: Not a shocker that the founder honors have to go to Musk who is only the second founder in valley history who has created three companies worth more than $1 billion — and I mean actually worth it… not ephemeral "unicorn" valuations. Jim Clark was first and he needed a bubble for Healtheon to make it. Even the great Robert Noyce "only" did two; ditto (Pando investor) Marc Andreessen. Even more remarkably, Musk was CEO of both Tesla and SpaceX at the same time. Right now Tesla is worth $33 billion. SpaceX’s most recent $1 billion round valued it at $12 billion.

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In the early Web 2.0 days, so much was made of the PayPal founders as investors and mentors to up and comers. It's taken some time, but many are proving they weren't flukes themselves and aren't complacent to have helped build one of the most enduring properties on the planet.

But even more impressive may be the breadth of companies founded. There's conventional wisdom in the valley now that says repeat entrepreneurs do best when they build companies all in the same industry segment. See Evan Williams with Blogger, Twitter and Medium. That’s yet another rule the Paypal mafia seems happy to ignore.