Why You And Your Business Partners Should Aim To Be Like The PayPal Mafia
If you were to look for the perfect, contemporary analogy to describe the success of the famed PayPal Mafia, there might be few examples better than the New England Patriots and the Belichick coaching tree.
Football fans will know the story. Seven of the many assistants who have worked under Patriots head coach Bill Belichick have also gone on to become head coaches elsewhere in the NFL. Seven others, meanwhile, have landed head coaching jobs at NCAA Division I schools and have, in turn, produced their own proteges.
Long story short, a number of high-profile coaches around the country can trace their success back to the Patriots' dynasty. Similarly, many of today's high-profile companies owe their existence to a different type of dynasty, one that is notoriously known in the tech world as the PayPal Mafia.
The PayPal Mafia consists of the cofounders and high-ranking employees who served as pioneers for the company of the same name. After building PayPal into a powerhouse and selling to eBay for $1.5 billion, the band of entrepreneurial brothers used the big sell as a mere stepping stone.
“We all knew we wanted to start companies,” PayPal cofounder Max Levchin told Charlie Rose last month. “We came to entrepreneurship from completely different points in our lives, but I think all of us were either starting this company — and Peter, Elon and I were starting this company — and everyone else knew that this was basically their last job. They were going to do their own thing next and this was the training ground.”
Once eBay purchased PayPal, the gang of geniuses left the company and went on to build their own respective projects, creating a litany of successful companies that are all connected by that network.
So successful is the PayPal Mafia that a strand of lineage from the company, where the dream all started, reads like the early verses of a book in the Bible:
Chapter one, Verse one: Peter Thiel met Max Levchin who, together, begot PayPal, which merged with SpaceX, the spawn of Elon Musk. Verse Two: PayPal hired Reid Hoffman, who begot LinkedIn, which invested in Digg, which hired Brian Wong, who begot Kiip.
From YouTube to Tesla, from Slide to Yelp, from Flickr to Clarium and all the companies in between, the PayPal Mafia's extraordinary success in going from strength to strength in the tech world doesn't simply provide a story to be marveled at. The tale of the group's success is something much more profound.
“It basically started by hiring all these people in concentric circles,” Thiel remembers in an iconic piece published by Fortune magazine in 2007.
“I hired friends from Stanford, and Max brought in people from the University of Illinois.”
The full version of the PayPal Mafia's journey, from the first employees of a tech startup to infamous network of entrepreneurs and venture capitalists, is a complex tale. It's filled with ingrate details, such as the long hours, the chronology of hirings, an IPO and even a coup (Musk was overthrown as CEO by Lechin and Co.). The shorter version, though, is truly something to aspire to.
For those who are into simplifying, the PayPal Mafia is a group of individuals who went from locking arms and being extremely dedicated to building a company, to then getting rewarded for that dedication to the tune of $1.5 billion, to using that success to fund further success in each others' ventures.
What's more is that PayPal, the company, did it in its own way, which very much went against the grain during its time.
“The difference between Google and PayPal was that Google wanted to hire PhD's, and PayPal wanted to hire the people who got into PhD programs and dropped out,” said former PayPal CEO Roelof Botha, who is now a general partner at Sequoia Capital. “It's a different temperament.”
But while Levchin and Thiel took on many employees who had, what other companies might have deemed, a lack of experience, PayPal served as somewhat of a university to its recruits. By the time the company had been bought by eBay, many of the Mafia's junior members had received all the education they needed.
“You never think it could happen to you,” said Mafia member Chad Hurley, cofounder of YouTube. “But seeing Peter and Max and the guys come up with ideas and seeing how to make things work gave me a lot of insight. You may not have a business degree, but you see how to put the process into effect. The experience helped me realize the payoff of being involved in a startup.”
While many other factions have been touted as the second coming to the famed group (the Twitter Mafia, the Google Mafia and the Facebook Mafia have been cited as the heir apparent by everyone from Forbes to TechCrunch), there's really only one.
Only one network of tech titans started off as relative unknowns to then go on and create such a supportive, interdependent network of enterprises. There's only one PayPal Mafia, no duplicates, and it's the entrepreneurs that you and your business partners should aspire to emulate.
Photo credit: Getty Images
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