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
to write the code and recruit the coders.” And he said, “Maybe I could be your
CEO.” So I said, “That’s a really good idea.” The next 2 weeks we were sort of
playing with the idea, and by 1/1/99 we agreed that he would be the CEO and I
would be the CTO.
Livingston: How did you have the idea?
Levchin: The initial idea was actually very different. At the time, I was really
into developing software for handheld devices, which is sort of an art and a
science unto its own. And I was really into security. This idea that I had in
college, which I was vaguely successful with—if you’ve ever seen these authentication
devices, like a little card that spits out numbers at you that you can log
in with. It’s like a one-time password generator, like S/Key, Digital Pathways,
and CRYPTOCard. Most of the algorithms are variations on the standard called
X9.9, which is a public standard. The algorithms don’t really use it correctly.
In college one day I had bought all the different kinds of cards. Each costs like
$50 or $100, so it’s not that expensive. They weren’t that difficult to reverseengineer
because you already know the standard, so you know it can’t be too far
outside the standard. I reverse-engineered most of them except for one which
was very proprietary. I decided not to touch that one since I was too poor to
handle a lawsuit.
Once I got them all reverse-engineered, I wrote an emulator for every
single type of them for a Palm Pilot. I had a lot of friends on campus who were
really into security as well—most of them were sys admins—and they carried a
whole bunch of these things in their pockets, because most of the time you can
only use one per computer, per system. If you adminned a lab with ten servers,
you’d have a stack of these things in your pocket, and that adds up. They are
heavy, and they need batteries. I basically emulated the whole thing on a Palm
Pilot so my friends were able to throw out their stupid devices and use my
thing.
I posted it on the Web, which was young and silly then, and I got hundreds

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