Who Made PayPal Successful | The PayPal Mafia |

There was a time when all the banking procedures
used to take place at the official buildings of the respective banks. Even the simple task of checking your account
balance used to require a trip to the bank. That is when bright minds like Elon Musk and
Peter Thiel came up with the idea of online money transfer service. Today, banking is at our fingertips we can
send money, pay bills, book tickets on just one click. So Hi guys this Pratik, You are watching eclectic
and this is the story of PayPal and Elon Musk. After selling the first company zip2 Elon
was now a young Silicon Valley millionaire and if you are interested in knowing how Elon
built his first company, watch the previous episode of this series. Elon since the beginning always believed that the internet
is going to disrupt the financial system. Banks were not doing anything new in the last
few decades. This is how Elon musk explained how he got
the idea of online money transfers. Elon Musk Interview What Elon trying to
say is that physical money is only the fraction of the money that is available in the world. When you transfer money online, it doesn’t
require big infrastructure because banks are not literally going to move your money from
one place to another. It is just an entry in the database. They are just going to make an entry of your
name and amount of money transferred in the database. But back then the biggest question was the
security. People were barely comfortable to enter their
credit card numbers to buy books online. However, Elon Musk was confident about his
idea. He invested the majority of the money which
he got from Zip2 deal into x.com. He assembled a team of good engineers. He hired people from various financial institutions
to bring the knowledge of finance into the x.com. Another challenge x.com faced was the regulatory
rules of the government. There we were so many legal blockades to open
an online bank at that time. Despite all these odds, Elon managed to secure
funding from Sequoia Capital. He gave visionary speeches about internet
banking and attracted many good engineers to work with him on x.com. X.com secured a banking license and a mutual
fund license and formed a partnership with Barclays(A British Multinational Investment
Bank). To encourage more customers x.com gave 20$
cash card just for signing up to use the service and a 10 dollar card for every person they
referred. X.com added a new feature in which users could
transfer money by using email. It proved to be a good viral marketing network. If customers wanted to transfer money to some
person using email and if that person is not on x.com then x.com used to send that person
an invitation mail to sign up. It is a type of marketing. Where your customers become your salespersons
and recommend your service to others. This was a revolutionary marketing strategy
and more than 2 lack people signed up for x.com within first few months. While x.com was gaining good momentum. Peter Thiel (who is also One of the early
investors of Facebook) and Max Levchin a computer scientist were working on a payment service
of their own startup called Confinity. Confinity also had the e-mail based payments
with their service known a PayPal. Between PayPal and x.com began the internet’s
first ever financial revolution. PayPal and x.com competed with each other
aggressively to attract more customers. However, in this aggressive competition, both
companies started losing money and finally confinity and x.com decided to work together,
they decided to merge their companies. After merging x.com and Confinity, Elon musk
remained the biggest shareholder of the company. However, this merger did not go well with
the employees of PayPal. Musk insisted to continue service as x.com
but most other employees were in favor of PayPal. PayPal team headed by levchin and Peter Thiel
favored moving towards open source software like Linux, while musk insisted on using Microsoft’s
data center service to keep productivity high. This conflict looks silly to us but for engineers,
it was equivalent to a religious war. Many engineers viewed Microsoft as a dated
evil empire and Linux as the modern software of the people. Peter Thiel and levchin left the company and
Elon Musk was left alone with the fractured company. The company’s website started collapsing
every once a week. The company was also facing more online frauds. Many employees even questioned Elon’s decision-making
capability. These employees later conspired against Elon
Musk and gave a letter of non-confidence to the board of directors of the x.com. Board of directors replaced Elon Musk and
made Peter Thiel the CEO of X.com. Peter Thiel rebranded x.com as PayPal. This was the second time Elon Musk was again
being pushed out of his own company. However, when Elon had a conversation with Peter Thiel he
understood that Peter Thiel can run PayPal efficiently. 2001 was the year when dot com bubble crashed
and everyone was in a hurry to cash out money. The e-commerce company eBay wanted to acquire
PayPal. Most of the PayPal Employees were in favor
of selling the company they wanted to make some real cash out of this deal during the
dotcom bubble. However, Musk requested the board not to sell
the company at below 1 billion dollars because PayPal was generating the revenue of 250 million
dollars per year. Paypal was not in the need of money. Finally, Elon musk’s resistance paid off
and in July 2002 ebay offered 1.2 billion dollars to acquire PayPal. Musk made 250 million dollars out of this
deal and now was in search of disrupting another industry in his next move. So when you ask who invented PayPal or who
founded PayPal we cannot particularly give all the credit to Elon musk or to Peter Thiel
for that matter. We can say that the credit of PayPal’s success
goes to Elon Musk, Peter Thiel, Max levchin and many bright engineers who have worked
at PayPal. Even the founder of youtube Jawed Kareem was
once an employee of PayPal. There is this interesting term which is used
for all the ex-employees of PayPal and that is the PayPal mafia – It is a group of former
PayPal employees and founders who have since founded and developed additional technology
companies[1] such as Tesla Motors, LinkedIn, Palantir Technologies, SpaceX, YouTube, Yelp,
and Yammer. All of them are billionaires and millionaires
of America. So, when you assemble a team of creative and
visionary people you can do wonders. If you are like the vides and
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our notification squad. Check out the list 5 best books listed below
to know more about the success stories of billion dollar companies.

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