Lessons to Learn from the PayPal Founders

PayPal is one of the enduring success stories from the dot-com era. Unlike many websites set up at the time, PayPal was not selling a product. PayPal was, and still is, a service to eCommerce entrepreneurs. It is said that during The Californian Goldrush, it was not the prospectors who made their fortunes but the people supplying them. The shovel sellers or suppliers of clothing and footwear.

Levi Strauss founded his fortune at the time by selling clothing and blankets, and his iconic denim jeans brand was born. Like the founders of PayPal, Strauss’s talent was for business. Everyone knows that the rivets on Levis made them so tough and durable. Few people know that Strauss did not invent this manufacturing process; a man called Davis did. Strauss supplied the finance and marketing technique. The pair applied for a patent and set up a manufacturing facility.  When Strauss died in 1902, he left a fortune worth more than $177 million in today’s money. The company, with his name, has over $3.5 billion in assets.

California’s more recent ‘gold rush’ took place in Silicon Valley and, to some extent, follows a similar pattern. Above all, it was about collaboration and innovation – finding new ways to do something and providing services to another industry. When dot-com went boom and then bust, the internet was an insecure place, and no one would seriously consider making any financial transactions on it. The finance sector was dominated by big-name banks, who were reluctant to embrace change. However, fintech was about to change everything.

Originally PayPal was a money transfer service offered by a company called Confinity. The business was established in December 1998 to provide secure software for handheld devices. The founders were Max Levchin, Peter Thiel, and Luke Nosek. Another fintech challenger, X.com, acquired the emerging company. X.com was one of the first internet banks, and its co-founders included Elon Musk. The company was renamed PayPal, and in 2002 it was acquired by eBay.

PayPal rapidly transformed from a peer-to-peer money transfer service to the leading fintech company of the generation. It was regarded as a much more secure platform than any services that the banks had to offer. They were always running to catch up with PayPal’s innovations. The banks set up their own ‘verified by’ schemes, but the advantage of PayPal remained that no banking details had to be disclosed. You do not need to share bank card or account numbers; an email address is sufficient. The robustness of PayPal’s systems means that it is a trust mark in its own right. Shoppers expect this option at checkout, and gamblers are reassured to see an instant PayPal withdrawal casino in the US. They know that they are on a site that can be used safely.

While PayPal has gone from strength to strength, the founders and staff discovered that eBay’s more corporate, structured organization was stifling. Within four years, only 12 of the initial fifty employees were still working there.

It would have been easy at this stage for any of those founders to rest on their laurels. They had all made significant sums of money by that stage and could have opted for an easy life. However, that is not what they did at all. Instead, what they have all done is gone on to create other even more innovative companies or become ‘angel investors in other creative businesses. Those early founders seemed to enjoy the buzz and thrill of success and are always looking for the chance to do it again.

However, it is all too easy to come up with a good idea. The proof of the pudding is whether you can bring together the people, finance, and tech to develop a business that can be sold. Many entrepreneurial companies fail because they are led by one charismatic person rather than sound systems and structures. PayPal is an example of an entrepreneurial business that could be scaled up and traded.

Was it worth reading? Let us know.