Crossover began as a consulting firm helping healthcare organizations be more efficientRead more...
PayPal was sold to eBay for $1.5 billion only five months after it went public in 2002
It's a look back at the modest days of startups, what traction they had in their first few years, and how they evolved. In the end, we hope to provide a glimpse into what great startups looked like in their first few years.
Stories like these are always well received because it reminds us that anyone, regardless of pedigree and environment, can rise above the noise and have great influence. They show us the value of being resilient, persistent, and committed. If we can follow their footsteps, maybe we too can have similar success.
This segment is on PayPal
— PayPal's First Year —
Founders (ages at the time): Max Levchin (23), Peter Thiel (30), Ken Howery (19) and Luke Nosek (22)
Founded: In September 1998 Levchin and Thiel come up with the idea for FieldLink. Levchin becomes CTO, Howry becomes CFO, Nosek is made VP of Marketing and Thiel is named CEO.
Initial company description: Levchin describes FieldLink as "a security focused company which allowed users to store encrypted information on Palm Pilots and other PDA devices, enabling their handheld devices to become digital wallets.”
Name change, three months from founding: In December 1998, the company changes its name to Confinity, which is a combination of the words "confidence" and "infinity."
First funding, at four months from founding: In January 1999, PayPal raises a seed funding round from Thiel, Scott Banister and Kevin Hartz.
Product, at nine months from founding: In June 1999, Confinity launches a feature called PayPal, which allows users to send money to each other via their mobile phones, Palm Pilots, and pagers.
"All these devices will become one day just like your wallet," Thiel says at the time. "Every one of your friends will become like a virtual, miniature ATM."
Second funding, at seven months from founding: At PayPal's launch party, Nokia Ventures uses the software to send $3 million in venture funding to Confinity through Thiel's Palm Pilot. Deutsche Bank also participates in the $4 million round.
— PayPal's Second Year —
Launch, at one year and one month from founding: In October 1999, PayPal is launched to the public, allowing anyone with an email address to send money.
The first PayPal transaction on record was sent on October 16, 1999.
Product, two months from launch, one year and three months from founding: In December 1999, PayPal.com announces the release of the Palm Organizer version of its software, joining its existing free online software.
Spokesperson, two months from launch, one year and three months from founding: James Doohan, known for playing Scotty on Star Trek, becomes the company's first official spokesman.
To commemorate the launch of PayPal.com's Palm Pilot application, Doohan uses the service to beam a total of one million dollars to individuals across the country.
Revenue, two months from launch, one year and three months from founding: For the full year 1999, Confinity makes $350,000 in revenue.
Third funding, at three months from launch, one year and four months from founding: On January 20, 2000, Confinity announces it Series B round of $23 million from idealab Capital Partners and Goldman Sachs Group, along with Deutsche Bank.
Merger, at five months from launch, one year and six months from founding: In March 2000, Confinity merges with online bank X.com, which was founded by Elon Musk a few months after Confinity. The value of warrants and options issued in connection with the acquisition totals $15.6 million. Bill Harris, CEO of X.com, remains CEO of the combined company, which takes the name X.com. Musk becomes Chairman.
"When I started X in Jan 1999 (formally incorporated in March 1999), the initial idea was to bring together a broad set of financial services in one seamless interface and then add special functionality, such as the ability to transfer money or securities instantly between account holders. However, when I showed the system to potential investors and beta customers, everyone was a lot more interested in email payments and not in the other stuff, so well before I had any idea what Confinity was doing, X shifted to an email payments focus," Musk writes in 2007.
"That was the reason X and Confinity wanted to join forces. You say that X was a failed bank, but when did it even have time to fail, bank or no? Both the X and Confinity websites only went live in the last few months of 1999 and the first merger discussions started in Dec 1999."
Traction, at five months from launch, one year and six months from founding: X.com and PayPal have a combined one million customers.
Fourth funding, at six months from launch, one year and seven months from founding: On April 5, 2000, X.com raises a $100 million equity financing round led by Madison Dearborn Partners, along with Temasek, Vertex, Development Bank of Singapore, Compass Partners, Hikari Tsushin, TAMC of Taiwan, QUALCOMM, Singapore Telecommunications, LabMorgan, J.P. Morgan's e-finance unit, funds managed by Capital Research and Management Company, Digital Century Capital, Bayview 2000, Sequoia Capital, Deutsche Bank, the Goldman Sachs Group, idealab Capital Partners, and Elon Musk.
Madison Dearborn Partners' Tim Hurd join X.com's Board of Directors.
Leadership change, at six months from launch, one year and seven months from founding: In April of 2000, Musk takes over the role of CEO of X.com from Bill Harris.
Product, at eight months from launch, one year and nine months from founding: In June 2000, PayPal introduces businesses accounts, where customers pay a fee of 30 cents plus 2.9 percent for each transaction. Business accounts can accept an unlimited number of credit card payments through PayPal every month, compared to the $500 in credit card business every six months for consumer accounts.
— PayPal's Third Year — September 2000 to August 2001
Leadership change, at one years from launch, two years and one month from founding: In October of 2000, Musk steps down as CEO and Thiel retakes the position. Musk continues to stay on as chairman of the Board of Directors.
Revenue, at two years and two month from launch, three years and three months from founding: For the full year 2000, X.com sees $12.5 million in revenue. More than one-fifth of PayPal's 12.8 million accounts are business accounts.
Name change, at two years and four months from launch, three years and five months from founding: In February 2001, X.com officially changes its name to PayPal.
Fifth funding, at two years and five months from launch, three years and six months from founding: On March 6, 2001, PayPal announces a $90 million Series D round from ING Group, Providian Financial, Credit Agricole, Bankinter, eBANK and others.
Traction, at two years and five months from launch, three years and six months from founding: By March 2001, PayPal is available in 26 countries.
— PayPal's Fourth Year — September 2001 to August 2002
IPO, at two years and 11 months from launch, three years from founding: PayPal files to go public on September 28, 2001, the first company to do so after the 9/11 attack in New York City.
"I thought this would be a cool thing to do because nobody else would be doing it. The unfortunate downside was that we got way more scrutiny than we otherwise would have," Thiel says in 2004.
Revenue, at two years and two month from launch, three years and three months from founding: For the full year 2001, the company sees $103.7 million in revenue.
In 2001, PayPal processes an average of 189,000 payments per day, totaling $9.6 million in daily volume, and it adds an average of 20,000 new accounts every day.
IPO, at two years and three months from launch, three years and four months from founding: On February 15, 2002, PayPal has its initial public offering. The company raises $70 million at a valuation of $800 million. On the launch date, the price of the shares peaks to $22 and closes at $20, up from a $13 IPO price.
Acquisition, at two years and nine months from launch, three years and 10 months from founding: On July 8, 2002, eBay announces that it is buying PayPal in an all-stock acquisition for $1.5 billion. More than 70 percent of all eBay auctions accept PayPal payments, and roughly 1 in 4 closed auction listings are transacted via PayPal.
Negotiations between PayPal and eBay had taken place over the prior year and a half, including five separate merger rounds between the two companies.
— PayPal Today —
The eBay acquisition closed in October 2002, and PayPal remained a part of eBay until the company announced in September 2014 that it was splitting PayPal off into own separate, standalone company. The decision was pushed by activist investor Carl Icahn. The two companies separated for good in July 2015.
PayPal went public again on July 20, 2015, valuing it at $50.8 billion. It is now trading at $76.25 a share.
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