PayPal was founded in December 1998 by recent
college grad Max Levchin and hedge fund manager
Peter Thiel. The company went through several
ideas, including cryptography software and a service
for transmitting money via PDAs, before finding its
niche as a web-based payment system. That service
became wildly popular for online vendors, especially
eBay sellers, who preferred it to traditional payment
methods. PayPal went public in early 2002 and was
acquired later that year by eBay for $1.5 billion.
PayPal was started during the Internet Bubble,
but it was...

have my hedge fund invest a little bit of money in it”—like a couple hundred
thousand dollars. That was a good thing, since I was starting to run out of
money.
I had just moved from Champaign; most of my contacts and friends were in
Chicago. One of them I was trying to convince to be the CEO. He wasn’t really
available, so I wound up being without a CEO. I called Peter and said, “This
investment is a great thing, but I have no one to run the company. I’m just going
...

and then thousands of downloads, and people were offering me money to get
more features in. So I thought, “This seems to be a business.” At the time, I was
just keen on getting any sort of business off the ground. So, when I moved to
the Valley, I basically pitched Peter on the following concept. There’s clearly
demand for moving these cryptographic operations that are poorly understood.
Even though it’s not rocket science to reverse-engineer this stuff, no one else
had done it before me, so there’s some complexity involved.
The real...

happened.
Livingston: Tell me about how you adapted the strategy.
Levchin: Initially, I wanted to do crypto libraries, since I was a freshly minted
academic. “I won’t even need to figure out how to do this commercialization
part. I’m just going to build libraries, sell it to somebody who is going to build
software, and I can just sit there and make a penny per copy and get marvelously
rich very quickly.” But no one was making the software because there
was no demand. So we said, “We’ll make the software.” We went...

a Palm Pilot, which at this point is very quaint and silly since, clearly, what
would you rather do, take out $5 and give someone their lunch share, or pull
out two Palm Pilots and geek out at the table? But that actually is what moved
the needle, because it was so weird and so innovative. The geek crowd was like,
“Wow. This is the future. We want to go to the future. Take us there.” So we got
all this attention and were able to raise funding on that story.
Then we had...