Silicon Sopranos

Earlier this month, it was announced that the 2008 Men’s Olympic Basketball team, known as the Redeem Team, will be inducted into the 2025 Naismith Basketball Hall of Fame.

This star-studded roster, including all-time greats like LeBron James, Kobe Bryant, Dwyane Wade, Carmelo Anthony, Chris Paul, and more, bounced back from the disappointing 2004 bronze medal finish and restored American pride in the worldwide sport it created.

Despite the phenomenal roster, anyone who “knows ball” understands this team pales in comparison to the greatest roster known to mankind: The 1992 Dream Team.

23 NBA championships. 11 MVPs. 117 All-Star Selections. 15 Scoring Titles. 10 Finals MVPs.

Unparalleled success.

It’s quite simple: when asking a basketball fan who the greatest team in history is, most say The Dream Team.

Similarly, when asking anyone in the startup world who the greatest team in history is, almost all will say, “The PayPal Mafia.”

The team that helped solidify PayPal as the alpha in the digital payment space consisted of Elon Musk (Tesla, SpaceX, Twitter, The Boring Company; $350B), Peter Thiel (Palantir, Founders Fund, Clarium Capital; $16B), Reid Hoffman (LinkedIn; $2.6B), Steven Chen (YouTube; $500M), Chad Hurley (YouTube; $800M), Jawed Karim (YouTube; $350M), Max Levchin (Affirm; $300M), David Sacks (Yammer; $500M), Jeremy Stoppelman (Yelp; $240M), and more.

The company was Levchin’s brainchild. After pitching the idea of an online payment platform to Thiel at a restaurant named Hobee’s near Stanford, Thiel immediately wanted to invest.

Levchin understood there was a massive opportunity in the market, as the only way to send money at the time was through mailing cash or a check.

Soon, Thiel found himself as the co-founder rather than merely an investor.

The Palo Alto-based company incorporated in 1998 as Fieldlink but soon changed its name to Confinity. The company’s person-to-person payment service would take on the name PayPal.

Initially targeting PalmPilot users, they quickly realized that a different target group would enable them to scale at ease: eBay users.

eBay had roughly 10 miilion people using its platform by 2000, and these users mailed checks when completing transactions.

To provide an incentive for users to onboard, Thiel and Levchin offered $10 for sign-ups and an additional $10 for referrals. This creative technique catalyzed massive growth for the company, and it quickly became normal for the site to crash due to an overflow of traffic.

On the flip side, growth was extremely costly: at its peak, the company was spending over $100,000 per day on user referrals and sign-ups.

Elsewhere in Palo Alto, another ambitious founder by the name of Elon Musk was working on a similar concept named x.com.

Before it became Twitter, x.com also offered an online payment service but was more focused on becoming an online bank and one-stop shop for all online financial services. After partnering with Barclays, the company onboarded over 200,000 people within its first two months by similarly offering a cash reward for signups and referrals.

In the spring and summer of 1999, the two companies actually occupied adjacent office spaces.

It was only a matter of time before they would engage in bloody warfare.

Employees at the two companies regularly had sleepless nights, including Musk infamously working for 40 straight hours to ensure the smooth onboarding of engineers he had just hired.

When the team did sleep, it was usually at the office, under their desk, in a sleeping bag.

Both groups had the utmost confidence that they would outlast the other but for different reasons.

Confinity boasted of more users and was experiencing higher rates of growth than Musk’s company.

On the other hand, x.com had much more cash on hand, while Confinity was consistently on the brink of running dry.

Eventually, both companies realized without some sort of partnership, they would both become insolvent, especially after eBay introduced its own online payment service Billpoint.

So in March of 2000, the companies decided to merge under the domain of x.com.

After the merger, the company added Bill Harris, the former CEO of Intuit, to be chief executive, with Musk serving as chairman, Levchin as CTO, and Thiel as EVP of Finance.

The Dream Team was finally taking shape.

But the dream didn’t last for very long.

Previous to Harris’s onboarding, Confinity’s culture was extremely unique.

The startup only hired “competitive, well-read, multilingual individuals, who, above all else, had a proficiency in math.”

Anyone outside of this box simply had no chance of joining.

After interviewing a candidate who mentioned he liked to “shoot hoops” in his free time, Levchin immediately turned him down.

The company was also infamous for not hiring women.

On one occasion, they were hesitantly considering adding a woman to the squad. The hesitation was not due to a lack of competitiveness or technical skills; rather, she was bad at ping-pong.

After much deliberation, they acquiesced and welcomed her to the team.

She left after six months.

According to Roelof Botha, former CFO of PayPal, they were different from Google, as rather than simply hiring Ph.D. students, they “wanted to hire the people who got into Ph.D. programs and dropped out.”

This anti-establishment mindset almost prevented the team from hiring David Sacks because of his short stint at McKinsey.

However, Sacks quickly proved he was anything but corporate, as he took on the role of the policing meetings. He would famously sit in on meetings for three minutes, and if he deemed it to be useless, the meeting was dismissed.

The company’s unique culture and flat organizational structure sparked creativity, nimbleness, and ingenuity.

However, that immediately changed with the merger and, more importantly, the addition of Harris as CEO.

The two fast moving startups became one slow, bureaucratic organization due to Harris’ corporate background.

Harris and Thiel never saw eye-to-eye, and Thiel strongly disagreed with Harris’s strategy of targeting PayPal users to sign up for an x.com bank account and charging users for every transaction.

The last straw for Thiel was Harris using company funds to make a political donation.

After this, Thiel sent in his letter of resignation.

Musk, quickly realizing Thiel was more essential than Harris, led a coupe against Harris and persuaded the board to fire him. After succeeding in this endeavor, Musk became CEO with Thiel becoming chairman.

After the reorganization, the company could focus its efforts on its battle with Billpoint.

eBay not only partnered with Wells Fargo to receive back-end payment processing and customer service support for its subsidiary, but also implemented tactics that incentivized users to use Billpoint instead of PayPal.

One such example included free listing days for those using Billpoint instead of paying a fee using PayPal.

Despite these efforts, x.com was still scaling at an impeccable rate, becoming the preferred payment system for eBay users.

Despite the success, the company’s drama was not in the rearview mirror.

Musk and the Confinity crew often butted heads, as disagreements like using Oracle (Musk) versus Microsoft (Levchin & co) and Musk’s insistence of phasing out the PayPal name from the website led to constant infighting.

Musk, notorious for never taking vacations, decided to finally take some time off and enjoy the Olympics in Sydney, Australia. While making his way over there, Sacks and a few other executives led the charge of convincing the board to get rid of Musk.

In the same fashion he ousted former CEO Bill Harris, Musk was booted from his role.

After the departure of Musk, the company officially changed its name to PayPal in June 2001.

Although the company was regularly dealing with high-level fraudsters, usually from Russia and Nigeria, PayPal seemed to have their biggest headaches behind them and was able to continually scale until going public in February 2002, raising $70.2M.

Just eight months later, eBay eventually threw in the white flag and extended a $1.5B offer to PayPal—one that the company could not turn down.

By 2011, PayPal had more than 100 million active users in 190 markets and settled transactions in 25 different currencies.

Notable acquisitions along the way include Venmo, Xoom, Zettle, Hyperwallet, Simility, and Paidy.

Musk, despite losing his CEO role at the hands of a conspiracy, was still the largest shareholder of the company and received a handsome pre-tax payout of $250M.

Not a bad return for (technically) six months of work.

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