The PayPal Mafia and the Companies That Came After

PayPal made its name moving money on the internet. Years later, it became almost as well known for the people who had passed through it. The nickname “PayPal Mafia” began as a bit of swagger. What gave it staying power was the way former colleagues hired one another, backed new companies and carried what they’d learned into the next wave of Silicon Valley startups.

The familiar story of innovation puts one person at the center. This one is about a group whose members knew what the others could do and could save each other time. They had people to call after a setback and, after a success, the means to back someone else. The network outlived the company that brought them together.

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1. After the eBay Acquisition

eBay acquired PayPal in a stock deal in 2002. For the payment service, it meant a home inside the marketplace where many of its users already did business. For the people who had built it, the sale opened up a choice about what to do next.

PayPal’s early team had spent its days dealing with fraud, risk and regulation under pressure. An established marketplace had a different pace and different priorities. For several of the founders and early employees, the sale became the start of a new round of companies.

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2. Where the Nickname Came From

The nickname stuck in part because of a 2007 Fortune photograph that staged the group as a mob family. It remains one of the more theatrical images Silicon Valley has produced of itself.

The photo worked because the former colleagues really did have a habit of getting involved in each other’s ventures. The help took practical forms: investment, introductions, hiring, early customers, press contacts and technical advice.

In a payment business, trust has to hold up when a transaction goes wrong. The team had worked together through fraudulent payments, regulatory uncertainty and questions about how the business could make money. In the next venture, former colleagues had a head start on knowing whose judgment they could rely on.

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3. Investing in One Another

When one person started a company, someone else might come in as an angel investor. A former colleague could introduce a venture capitalist, recommend a hire or help get a stalled product moving. Each venture could draw on experience from more than one team.

A startup can burn months finding out whether customers exist, a regulatory obstacle matters or the right people will join. PayPal’s alumni had already worked through several of those questions together. A founder could start the next project with someone else’s experience in mind.

Peter Thiel is often cited for the importance he places on building a durable advantage over competitors. His thinking and his relationships were among the influences the group carried from PayPal into the Valley’s investment and startup circles.

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4. The Industries They Went Into

The familiar list of PayPal alumni is usually organized by who founded what. It’s also worth asking what became routine once those businesses caught on.

• Elon Musk came to PayPal through the merger of his company X.com with Confinity. At Tesla and SpaceX, he went on to push electric vehicles and private spaceflight into the public imagination.
• Reid Hoffman helped make a public professional profile and network a standard feature of working life through LinkedIn.
• Steve Chen and Chad Hurley co-founded YouTube with Jawed Karim, making video sharing an everyday activity.
• Jeremy Stoppelman co-founded Yelp, which built a platform around finding and reviewing local businesses.
• Peter Thiel co-founded Palantir, which became a major presence in data analysis.

The companies influenced the habits of people far beyond their customers and investors. Tesla helped quicken the shift toward electric cars, YouTube became a default way to distribute video, and LinkedIn changed what an online résumé could be. They created places and tools people came to rely on.

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5. What the Network Could Reproduce

The part I find most interesting is how much of the model could be repeated. Silicon Valley likes the word innovation. Here the ingredients were more concrete: former colleagues, trust, references and money for the next venture.

Founders often talk about getting from zero to one. This group found ways to start over with some of the knowledge it had acquired the first time. Hiring, investment and a shared way of working carried it from company to company.

The history suggests a different way to think about who makes an innovation possible.

What an individual can do changes when the people around them already know how to work together.

Speed came in part from a network willing to vouch for people and back their next move. The alumni’s influence kept spreading because their experience and resources moved with them.