PayPal Mafia
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PayPal and the Making of Billionaires
YouTube, LinkedIn, Yelp, SpaceX, Tesla, Palantir, and now Affirm. What do these digital powerhouses have in common? Two things: Each was started by one of the original funders or executives of PayPal, and each has made its own founder a billionaire.
You may not know the history of PayPal, but I’m sure you’ve heard of its most famous investor, Elon Musk, the richest man in the world. Musk wasn’t the originator of PayPal, though. It was originally a company called Confinity, founded by Max Levchin, Luke Nosek, and Peter Thiel in late 1998. They were later joined by Reid Hoffman. When its first business model – security software for handheld devices – didn’t pan out, they switch business models to developing and implementing a digital wallet. That was the first version of PayPal and was launched in 1999.
In 2000 Confinity merged with X.com, an online banking firm founded by Elon Musk. In October of that year Musk declared that X.com would abandon its other Internet banking operations and place its focus on the digital wallet. During that same month, though, Musk was replaced as CEO by Peter Thiel. X.com was renamed PayPal in 2001 and went public in 2002.
As a group these men are often known as the PayPal Mafia. (No criminal activity is suggested by the name.) While PayPal was financially good to them, that was just a springboard to greater heights. Their reputations and wealth really exploded when they left PayPal.
Key suspects…
Tesla and SpaceX were founded by Elon Musk. LinkedIn was co-founded in 2002 by Reid Hoffman, who joined PayPal in 2000 as the company’s COO. Peter Thiel, another co-founder of PayPal, is a now a venture capitalist, a co-founder of Palantir Technologies and the Founders Fund, as well as the first outside investor in Facebook. Luke Nosek is also a successful venture capitalist.
All these PayPal alumni are now multi-billionaires and have just been joined in the billionaire’s club by the fifth: Max Levchin. His post-PayPal wealth is due to Affirm, which he co-founded with Nathan Gettings of Palantir Technologies and Jeff Kaditz of First Data. Levchin is the company's CEO.
Photo Source: Nasdaq
Affirm begins trading on Nasdaq
Affirm’s focus is offering installment loans to consumers that are available at the point of sale, such as an e-Commerce website or brick and mortar store. Affirm has logged rapid growth over the last few years by partnering with online retailers to offer customers loans when they check out. Consumers then can pay the loan back over three, six, or 12 months. In the fiscal year ending in June, Revenue nearly doubled to $509.5 million. Peloton is Affirm's biggest partner and accounted for 28% of its 2020 revenue. Affirm's market cap entering its IPO was $10 billion.
Affirm made its IPO on Wednesday, January 13 and on its first day of trading the stock rose 110% for a value of $1.2 billion. Shares of Affirm rocketed past its $38 upper projection and debuted at $49 per share. Affirm now has a market cap of $24 billion.
As you can see, sometimes even a very successful business is only a springboard to greater success. PayPal underwent an evolution, with name changes and being sold to other companies. Its funders/founders left, didn’t rest on their laurels, and started their own firms. The result: The PayPal Mafia, a group of multi-billionaires who have changed not only the world’s digital lives, but also our culture.