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well, this is an interesting book. Good to know how was the development of his payment service.
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Bought it because Amazon kept recommending it and I usually like business stories. Story was disappointing. Mr. Jackson was not high level enough to have great insights. The interesting personalities at PayPal such as Peter Thiel, Max Levchin, etc., which should have been the focus of the story, received less pages than placement of various buttons in the "fight" with eBay. The author found out about the PayPal merger after it was announced so missed that key story as well. Overall quite disappointing.
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Eric M. Jackson's "The PayPal Wars" stands as one of the finest accounts yet written of the heady days of dot-com in 2000 and 2001. What makes Jackson's account so imminently readable is the author's sense of humility, and his reflexive empathy for the travails of his colleagues at PayPal.
Originally recruited away from Anderson by Peter Theil, Jackson writes from the vantage of one accustomed to the ways of the old economy-- strict hierarchy, clearly-defined roles, and an emphasis on structure. Jackson reported to work his first day to find that no one at PayPal was aware he had been hired; after getting over his initial panic, he quickly learned that the new economy prized a different set of values: speed, flexibility, egalitarianism, and, above all, talent. Despite having no prior marketing experience, Jackson quickly learned the ropes and ascended to a position of prominence within the fledgling organization.
Jackson's observations ring true to anyone fortunate enough to have worked in a high-growth tech startup:
* Customer service was playing catch-up to the company's emphasis on growth, with unanswered email queues exceeding 100,000 at times.
* Simple search queries used to generate internal usage reports would threaten to crash the public site due to scaling problems.
* Engineers sparred over which platform to use (Oracle or NT), ultimately developing for both in parallel.
* Upper-management preoccupied itself with inking biz dev deals to increase growth instead of fixing serious site problems that were causing users to leave.
Throughout his narrative, Jackson pulls few punches, and writes with convincing sincerity about the strengths and weaknesses of the company he helped to create:
"I'll certainly acknowledge that our company wasn't beyond media dissection. In fact, we deserved it! We had racked up $92 million in operating losses through the first three quarters of the year against revenues of just $6 million. CNET, The Red Herring, and other media outlets had every right to sink their teeth into a company with such a dangerous burn rate..."
Peter Theil emerges as a true visionary, having originally conceived of PayPal as a way of allowing citizens across the world bypass currency-devaluing actions of their local governments by letting them transfer savings into foreign-denominated currency. While this vision never came to pass, the encompassing nature of his vision seized the imagination of those who toiled to make PayPal succeed. Theil also had the financial acumen to realize that unless he closed his venture round quickly in the spring of 2001, the continuing slide of NASDAQ would scare away the investors he had so carefully brought to the table. He closed a $100 million round just in time by instructing the investment bank not to haggle over the company's valuation-- just to close the round as fast as possible. Had he waited even a few more days, his investors would have fled to safety, and PayPal would have run out of cash.
Some of the most delicious passages of Jackson's account are those which describe the culture of PayPal's ultimate buyer, eBay:
"EBay employees seemed trained to make phone calls to everyone who might have even the remotest interest in the matter and invite them to the yet-to-be-scheduled meeting. After at least two dozen invitations had been extended, a meeting time and location would be scheduled about a week in advance. The following day, like clockwork, the meeting would be rescheduled because of a calendar conflict of a peripheral stakeholder. After several rounds of schedule shuffling, attendees filing into the summit would be handed a thick set of PowerPoint slides filled with bullet points, tables, and an aphorism or two... The duration of the meeting would then be devoted to wading through the voluminous set of slides, with the usual outcome being an agreement to set up a follow-up meeting wo that the issues raised by the slides could be further discussed."
Ultimately, the usurpation of PayPal's innovative culture for eBay's beauracratic one led Jackson, as well as most of his fellow PayPal colleagues, to depart. The strength of PayPal's bench can be readily seen by considering what its members did later--
* Peter Theil became a major figure in the venture arena, where he helped build the then-nascent social network, Facebook.
* Reid Hoffman went on to take the helm of LinkedIn, which has since gone through a successful IPO.
* Chad Hurley and Steve Chen founded YouTube (later acquired by Google).
* Jeremy Stoppleman and Russel Simmons founded Yelp.
* Premal Shah founded Kiva.
* Dave McClure founded SimplyHired.
One of the few downsides of Jackson's compelling account is his insertion of political positions which he presents as if his readers will naturally share his outlook. While not over-wrought, his endorsements of Milton Freidman, Bernie Goldberg, and his sweeping denunciations of regulatory agencies wear on the reader who is otherwise inclined to affirm Jackson's observations on life in a high-growth company. In an afterword which describes the threat posed to eBay and PayPal from an ascendent Google, Jackson intones that "Google's management appears to be overwhelmingly left-wing"-- a pronouncement which is intended to spook the reader.
Despite his politics, Eric Jackson has penned a wonderful time-capsule of the heady days of the dot-com blast. If you are looking for a highly-readable volume which avoids the standard cant while offering a first-hand account of what life is really like in a startup, look no further.
Originally recruited away from Anderson by Peter Theil, Jackson writes from the vantage of one accustomed to the ways of the old economy-- strict hierarchy, clearly-defined roles, and an emphasis on structure. Jackson reported to work his first day to find that no one at PayPal was aware he had been hired; after getting over his initial panic, he quickly learned that the new economy prized a different set of values: speed, flexibility, egalitarianism, and, above all, talent. Despite having no prior marketing experience, Jackson quickly learned the ropes and ascended to a position of prominence within the fledgling organization.
Jackson's observations ring true to anyone fortunate enough to have worked in a high-growth tech startup:
* Customer service was playing catch-up to the company's emphasis on growth, with unanswered email queues exceeding 100,000 at times.
* Simple search queries used to generate internal usage reports would threaten to crash the public site due to scaling problems.
* Engineers sparred over which platform to use (Oracle or NT), ultimately developing for both in parallel.
* Upper-management preoccupied itself with inking biz dev deals to increase growth instead of fixing serious site problems that were causing users to leave.
Throughout his narrative, Jackson pulls few punches, and writes with convincing sincerity about the strengths and weaknesses of the company he helped to create:
"I'll certainly acknowledge that our company wasn't beyond media dissection. In fact, we deserved it! We had racked up $92 million in operating losses through the first three quarters of the year against revenues of just $6 million. CNET, The Red Herring, and other media outlets had every right to sink their teeth into a company with such a dangerous burn rate..."
Peter Theil emerges as a true visionary, having originally conceived of PayPal as a way of allowing citizens across the world bypass currency-devaluing actions of their local governments by letting them transfer savings into foreign-denominated currency. While this vision never came to pass, the encompassing nature of his vision seized the imagination of those who toiled to make PayPal succeed. Theil also had the financial acumen to realize that unless he closed his venture round quickly in the spring of 2001, the continuing slide of NASDAQ would scare away the investors he had so carefully brought to the table. He closed a $100 million round just in time by instructing the investment bank not to haggle over the company's valuation-- just to close the round as fast as possible. Had he waited even a few more days, his investors would have fled to safety, and PayPal would have run out of cash.
Some of the most delicious passages of Jackson's account are those which describe the culture of PayPal's ultimate buyer, eBay:
"EBay employees seemed trained to make phone calls to everyone who might have even the remotest interest in the matter and invite them to the yet-to-be-scheduled meeting. After at least two dozen invitations had been extended, a meeting time and location would be scheduled about a week in advance. The following day, like clockwork, the meeting would be rescheduled because of a calendar conflict of a peripheral stakeholder. After several rounds of schedule shuffling, attendees filing into the summit would be handed a thick set of PowerPoint slides filled with bullet points, tables, and an aphorism or two... The duration of the meeting would then be devoted to wading through the voluminous set of slides, with the usual outcome being an agreement to set up a follow-up meeting wo that the issues raised by the slides could be further discussed."
Ultimately, the usurpation of PayPal's innovative culture for eBay's beauracratic one led Jackson, as well as most of his fellow PayPal colleagues, to depart. The strength of PayPal's bench can be readily seen by considering what its members did later--
* Peter Theil became a major figure in the venture arena, where he helped build the then-nascent social network, Facebook.
* Reid Hoffman went on to take the helm of LinkedIn, which has since gone through a successful IPO.
* Chad Hurley and Steve Chen founded YouTube (later acquired by Google).
* Jeremy Stoppleman and Russel Simmons founded Yelp.
* Premal Shah founded Kiva.
* Dave McClure founded SimplyHired.
One of the few downsides of Jackson's compelling account is his insertion of political positions which he presents as if his readers will naturally share his outlook. While not over-wrought, his endorsements of Milton Freidman, Bernie Goldberg, and his sweeping denunciations of regulatory agencies wear on the reader who is otherwise inclined to affirm Jackson's observations on life in a high-growth company. In an afterword which describes the threat posed to eBay and PayPal from an ascendent Google, Jackson intones that "Google's management appears to be overwhelmingly left-wing"-- a pronouncement which is intended to spook the reader.
Despite his politics, Eric Jackson has penned a wonderful time-capsule of the heady days of the dot-com blast. If you are looking for a highly-readable volume which avoids the standard cant while offering a first-hand account of what life is really like in a startup, look no further.
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I didn't know a lot of the things about PayPal or eBay highlighted in this book, and the timeframe the book takes place in feels like just yesterday for me.
I vaguely remember a lot of the stuff the author goes over, but this book definitely filled in the missing pieces.
If you're into technology, and you enjoyed using eBay and or PayPal over the years, I definitely think this quick read should be added to your "Want to Read" list.
I vaguely remember a lot of the stuff the author goes over, but this book definitely filled in the missing pieces.
If you're into technology, and you enjoyed using eBay and or PayPal over the years, I definitely think this quick read should be added to your "Want to Read" list.
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If you're interested in tech history and the story behind the rise of PayPal, "The PayPal Wars" is a fascinating read. The book offers an insider's perspective on the early days of the company, filled with intense competition, legal battles, and strategic moves that led PayPal to become the dominant player in online payments. I appreciated the detailed accounts of the internal challenges and conflicts with eBay, but I did feel that some parts were a bit biased, giving more credit to the company than may be deserved.
One thing to keep in mind is that while this book talks a lot about PayPal's triumphs, if you've ever had to deal with their customer service, you might find yourself a bit skeptical. There’s a big difference between what’s written in the book and what customers experience today. For real-world experiences, I’d recommend checking out reviews on sites like https://paypal.pissedconsumer.com/cus... to get a sense of how the company handles issues in the present day.
Overall, "The PayPal Wars" is a compelling read for anyone interested in the tech industry, though it's always good to remember the other side of the story.
One thing to keep in mind is that while this book talks a lot about PayPal's triumphs, if you've ever had to deal with their customer service, you might find yourself a bit skeptical. There’s a big difference between what’s written in the book and what customers experience today. For real-world experiences, I’d recommend checking out reviews on sites like https://paypal.pissedconsumer.com/cus... to get a sense of how the company handles issues in the present day.
Overall, "The PayPal Wars" is a compelling read for anyone interested in the tech industry, though it's always good to remember the other side of the story.
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Excellent recent history and overview of how a startup is successful in Silicon Valley. Perhaps focuses a little too much on eBay. I would have liked to know more of the technical details on how paypal combatted rampant fraud and mafia incursions.
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A fascinating story about the birth of one of the Internet giant told by someone who was part of it.
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Monday afternoon I left Andersen early to head south along Highway 101 to Palo Alto
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Mediocre
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Good for those with a particular interest in the company or industry...Also may be of interest to those who want to learn more about how start-ups grow /evolve
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erstwhile
compatriots
cautionary tale
I joined an independent student newspaper named the Stanford Review. Founded by Peter in 1987
He then began collaborating with another former Review editor, David Sacks, on The Diversity Myth
Peter had recently moved back to the San Francisco Bay Area to set up his own hedge fund, and the lecture opportunity enabled him to discuss an issue he knew well. The animated speech Peter delivered inspired a twenty-four year old programmer in the audience to introduce himself afterward. Max Levchin had good reason to show interest in Peter’s remarks.
raison d’être
Peter’s background in finance prompted him to suggest money as a potential area of focus.
credit card and ATM networks had vastly expanded the payment options available to consumers, but these infrastructure-heavy systems also had significant shortcomings. Without exact cash on hand, a consumer’s only option was to write a check, a cumbersome form of payment that required a trip to the bank and a wait of several days before the check cleared and the recipient could take possession of the funds. Peter and Max surmised that technology had yet to offer a viable alternative to cash for person-to-person payments.
Confinity, a combination of “confidence” and “infinity.”
Marty Hellman, the inventor of public key cryptography, joined the company’s advisory board, and Bill Melton, the founder of VeriFone, provided his backing, as well.
“Ken Howery has just Beamed you Money!” the message’s text read.
“You now have $1.00 waiting for you at PayPal. Visit www.PayPal.com to set up your PayPal account today!”
its promotional bonus program rewarded all new account holders with a $10 deposit just for registering and linking a credit card to their account. And that wasn’t all. Confinity would also pay users $10 for every new customer they referred to the service who completed the registration requirements!
Because of his penchant for demanding long hours and assigning inane tasks, Andersen staffers didn’t ask people working for the Troll how things were going— they knew what the answer would be. I settled for a euphemism. “It’s been busy.”
a left-brained, analytical type who weighs his options carefully before passing judgment
“Great! On Sunday I’m going to be up in the city to meet with some potential Japanese investors,” Peter replied. “Let’s meet around one o’clock in the Marina.”
over a plate of ravioli. Within forty-
eight hours I had received and accepted a verbal offer from Peter and agreed to start the following Friday.
but our group’s head partner turned red with rage and roared that I had burned my bridges. to chase after fool’s gold
Luke Nosek, the company’s vice president of marketing
zestful greeting
He said I could do either marketing or press and investor relations.
On Luke’s monitor was a rectangular pop-up box labeled the “World Domination Index.” It was a counter linked to the PayPal database that refreshed every few minutes. The number inside the box stood at 2,413.
megalomaniacal
Watching Dave address a matter that was beneath his position in a field in which he had no experience at least suggested that I wasn’t the only person in the company whose responsibilities were not set in stone.
“Here it is,” he exclaimed as he flicked on the lights, “the ping pong room!”
ensconced
The CFO—David Jaques, a British national and the former treasurer of Silicon Valley Bank
The massive plank served as my makeshift workstation until I finished assembling my own particleboard desk over the weekend
extolling
Board games, especially “Risk,” littered the floors. occasional water gun fight broke out in the hallways.
the company’s average employee was about twentyfive years old. At thirty-two, Peter was the second oldest person
They use inflation and sometimes wholesale currency devaluations, like we saw in Russia and several Southeast Asian countries last year, to take wealth away from their citizens.
diminish the magnitude of Peter’s vision
this little startup had the ability to upend the world’s financial systems by giving consumers unparalleled power over their own finances.
Many of the engineers carried around copies of Cryptonomicon by Neal Stephenson, a novel about the offspring of World War II army coders who conspired to build an offshore haven for encryption-protected data in Asia
whisk their money away to safety by exchanging it for a more stable foreign currency and storing it far away from the reach of their own floundering governments.
Kenny Howery and Jennifer Chwang, the fiancée of my venture capitalist friend
Luke echoed this strategy. Growth, he insisted, was critical for a startup at this stage to deter potential competitors and position us to implement a business model that would begin to generate serious revenue.
With this focus, Luke tasked our team with introducing a combination of advertising banner and direct mail campaigns to acquire new customers. Soon I found myself surfing direct marketing sites and calling smoozy salesmen to ask about their clickthrough rates and opt-in lists, terms I hadn’t even known a few weeks earlier.
on Sand Hill Road in adjacent Menlo Park
Sand Hill is to venture capital what Wall Street is to the stock market
I’d like to introduce Reid Hoffman,” he said. “Reid is the founder of SocialNet.com and is a member of our board. Starting next week, Reid is going to come on full-time as president, reporting directly to me. He’ll be in charge of operations and day-to-day matters, letting me spend more time on setting our strategic vision and financing.”
even the Japanese businessman whom an engineer accidentally struck in the head with a remote-controlled dirigible went away undeterred.
X.com made a media splash when Elon lured Bill Harris, the former CEO of software maker Intuit, to head the venture. Harris bragged to The Wall Street Journal that he had received CEO offers from more than one hundred startups but chose X.com because he saw it as “a blank canvas upon which to write new rules on the delivery of financial services.”
X.com also generated some additional buzz toward the end of 1999 with a no-fee, no-minimum balance S&P 500 index fund, the only one of its kind.3 This loss leader product had been rationalized as a way to attract new users who could be up-sold to X.com’s other financial products, including its bond and money market funds, interest-bearing checking accounts, and low APR credit lines.
Robert Metcalfe, the inventor of Ethernet and founder of 3Com, coined Metcalfe’s Law as a way of understanding the power of networks. He claimed that the value of a network equals the square of its users, implying that a network with twice as many users as a competitor is four times as valuable.
He pushed hard on the engineering team to add dotBank’s money request and group billing features to our site before Christmas, and later to duplicate X.com’s customized referral link.
After interviewing a score of opt-in subscription services, I chose a mailing company that offered lists with tech-loving “early adopters,” including Palm users and college students.
“What did the cost per user acquisition work out to?” Peter asked, getting quickly to the point by collecting the data he believed was needed to make a decision. “A little less than $20 per account, but we’ll see that come down a little over the next few days as more recipients read the e-mail and sign up,” I noted. “That’s really good,” Peter replied, leaning back in his chair and pausing to calculate some figures in his head. When he finally opened his mouth again, the words that came out surprised me. “We need to scale this up quickly. How fast can you spend $1 million?” Online auction shoppers immediately came to mind.
This meant that buyers typically had to mail checks or money orders to their seller in the amount of their winning bid. The time the payments spent in the mail, plus the time required for personal checks to clear, added about a week to the waiting period that high bidders had to endure just to receive their treasure. It was a clumsy process for an Internet service, one that PayPal could clearly improve.
If I made the call to invest a significant amount of funds to pursue this demographic, while it might help me meet Peter’s ambitious marketing target, it would also leave me vulnerable to criticism for pursuing a demographic the company didn’t want.
technophiles
PayPal seemed to be firing on all cylinders
His focus, much like his wavy hair, had a habit of bouncing from place to place without much warning. Yet unlike so many intellectuals who seem to care more about ideas than people, Luke took an active interest in those around him.
Sacks, on the other hand, exuded focus. Though an avid movie buff, this law graduate spent jaw-dropping amounts of time at work.
PayPal also proved a hot topic on eBay’s discussion boards, with the conversation topics varying from the practical to the paranoid. Is PayPal safe? How do I get my money out? How many referral bonuses have you earned? What happens to my money if PayPal shuts down?
proof that PayPal was beginning to take root in eBay’s online community
my marketing campaign had already planted the seed. Now it was time for us to help it grow.
If we could increase our number of accounts to reach critical mass before our competitors, the resulting network effect would freeze out any opponents. Potential users would not waste time signing up for multiple accounts with different payment services if PayPal were ubiquitous. But if we failed and another service outpaced us, then there probably would be nothing we could do to catch up.
“For the next several months,” Luke continued, “all of our work is going to focus on eBay. For marketing, all of our direct mails should be to auction users. And, since we can’t buy advertising directly on eBay’s site, we’ll get online banners and magazine ads in other places where eBay users go.
PayPal reached a significant milestone. In late January we registered our 100,000th account. As a countdown to the event, our receptionist pasted a large thermometer made out of white construction paper to the wall of our lobby. Each day she used a red marker to fill in another portion of the thermometer and the company watched as we drew closer to the 100,000 figure at the top. When PayPal finally reached the mark, we held a party complete with six cakes—one sported the number “1” on top, and the other five each had a “0.”
compatriots
cautionary tale
I joined an independent student newspaper named the Stanford Review. Founded by Peter in 1987
He then began collaborating with another former Review editor, David Sacks, on The Diversity Myth
Peter had recently moved back to the San Francisco Bay Area to set up his own hedge fund, and the lecture opportunity enabled him to discuss an issue he knew well. The animated speech Peter delivered inspired a twenty-four year old programmer in the audience to introduce himself afterward. Max Levchin had good reason to show interest in Peter’s remarks.
raison d’être
Peter’s background in finance prompted him to suggest money as a potential area of focus.
credit card and ATM networks had vastly expanded the payment options available to consumers, but these infrastructure-heavy systems also had significant shortcomings. Without exact cash on hand, a consumer’s only option was to write a check, a cumbersome form of payment that required a trip to the bank and a wait of several days before the check cleared and the recipient could take possession of the funds. Peter and Max surmised that technology had yet to offer a viable alternative to cash for person-to-person payments.
Confinity, a combination of “confidence” and “infinity.”
Marty Hellman, the inventor of public key cryptography, joined the company’s advisory board, and Bill Melton, the founder of VeriFone, provided his backing, as well.
“Ken Howery has just Beamed you Money!” the message’s text read.
“You now have $1.00 waiting for you at PayPal. Visit www.PayPal.com to set up your PayPal account today!”
its promotional bonus program rewarded all new account holders with a $10 deposit just for registering and linking a credit card to their account. And that wasn’t all. Confinity would also pay users $10 for every new customer they referred to the service who completed the registration requirements!
Because of his penchant for demanding long hours and assigning inane tasks, Andersen staffers didn’t ask people working for the Troll how things were going— they knew what the answer would be. I settled for a euphemism. “It’s been busy.”
a left-brained, analytical type who weighs his options carefully before passing judgment
“Great! On Sunday I’m going to be up in the city to meet with some potential Japanese investors,” Peter replied. “Let’s meet around one o’clock in the Marina.”
over a plate of ravioli. Within forty-
eight hours I had received and accepted a verbal offer from Peter and agreed to start the following Friday.
but our group’s head partner turned red with rage and roared that I had burned my bridges. to chase after fool’s gold
Luke Nosek, the company’s vice president of marketing
zestful greeting
He said I could do either marketing or press and investor relations.
On Luke’s monitor was a rectangular pop-up box labeled the “World Domination Index.” It was a counter linked to the PayPal database that refreshed every few minutes. The number inside the box stood at 2,413.
megalomaniacal
Watching Dave address a matter that was beneath his position in a field in which he had no experience at least suggested that I wasn’t the only person in the company whose responsibilities were not set in stone.
“Here it is,” he exclaimed as he flicked on the lights, “the ping pong room!”
ensconced
The CFO—David Jaques, a British national and the former treasurer of Silicon Valley Bank
The massive plank served as my makeshift workstation until I finished assembling my own particleboard desk over the weekend
extolling
Board games, especially “Risk,” littered the floors. occasional water gun fight broke out in the hallways.
the company’s average employee was about twentyfive years old. At thirty-two, Peter was the second oldest person
They use inflation and sometimes wholesale currency devaluations, like we saw in Russia and several Southeast Asian countries last year, to take wealth away from their citizens.
diminish the magnitude of Peter’s vision
this little startup had the ability to upend the world’s financial systems by giving consumers unparalleled power over their own finances.
Many of the engineers carried around copies of Cryptonomicon by Neal Stephenson, a novel about the offspring of World War II army coders who conspired to build an offshore haven for encryption-protected data in Asia
whisk their money away to safety by exchanging it for a more stable foreign currency and storing it far away from the reach of their own floundering governments.
Kenny Howery and Jennifer Chwang, the fiancée of my venture capitalist friend
Luke echoed this strategy. Growth, he insisted, was critical for a startup at this stage to deter potential competitors and position us to implement a business model that would begin to generate serious revenue.
With this focus, Luke tasked our team with introducing a combination of advertising banner and direct mail campaigns to acquire new customers. Soon I found myself surfing direct marketing sites and calling smoozy salesmen to ask about their clickthrough rates and opt-in lists, terms I hadn’t even known a few weeks earlier.
on Sand Hill Road in adjacent Menlo Park
Sand Hill is to venture capital what Wall Street is to the stock market
I’d like to introduce Reid Hoffman,” he said. “Reid is the founder of SocialNet.com and is a member of our board. Starting next week, Reid is going to come on full-time as president, reporting directly to me. He’ll be in charge of operations and day-to-day matters, letting me spend more time on setting our strategic vision and financing.”
even the Japanese businessman whom an engineer accidentally struck in the head with a remote-controlled dirigible went away undeterred.
X.com made a media splash when Elon lured Bill Harris, the former CEO of software maker Intuit, to head the venture. Harris bragged to The Wall Street Journal that he had received CEO offers from more than one hundred startups but chose X.com because he saw it as “a blank canvas upon which to write new rules on the delivery of financial services.”
X.com also generated some additional buzz toward the end of 1999 with a no-fee, no-minimum balance S&P 500 index fund, the only one of its kind.3 This loss leader product had been rationalized as a way to attract new users who could be up-sold to X.com’s other financial products, including its bond and money market funds, interest-bearing checking accounts, and low APR credit lines.
Robert Metcalfe, the inventor of Ethernet and founder of 3Com, coined Metcalfe’s Law as a way of understanding the power of networks. He claimed that the value of a network equals the square of its users, implying that a network with twice as many users as a competitor is four times as valuable.
He pushed hard on the engineering team to add dotBank’s money request and group billing features to our site before Christmas, and later to duplicate X.com’s customized referral link.
After interviewing a score of opt-in subscription services, I chose a mailing company that offered lists with tech-loving “early adopters,” including Palm users and college students.
“What did the cost per user acquisition work out to?” Peter asked, getting quickly to the point by collecting the data he believed was needed to make a decision. “A little less than $20 per account, but we’ll see that come down a little over the next few days as more recipients read the e-mail and sign up,” I noted. “That’s really good,” Peter replied, leaning back in his chair and pausing to calculate some figures in his head. When he finally opened his mouth again, the words that came out surprised me. “We need to scale this up quickly. How fast can you spend $1 million?” Online auction shoppers immediately came to mind.
This meant that buyers typically had to mail checks or money orders to their seller in the amount of their winning bid. The time the payments spent in the mail, plus the time required for personal checks to clear, added about a week to the waiting period that high bidders had to endure just to receive their treasure. It was a clumsy process for an Internet service, one that PayPal could clearly improve.
If I made the call to invest a significant amount of funds to pursue this demographic, while it might help me meet Peter’s ambitious marketing target, it would also leave me vulnerable to criticism for pursuing a demographic the company didn’t want.
technophiles
PayPal seemed to be firing on all cylinders
His focus, much like his wavy hair, had a habit of bouncing from place to place without much warning. Yet unlike so many intellectuals who seem to care more about ideas than people, Luke took an active interest in those around him.
Sacks, on the other hand, exuded focus. Though an avid movie buff, this law graduate spent jaw-dropping amounts of time at work.
PayPal also proved a hot topic on eBay’s discussion boards, with the conversation topics varying from the practical to the paranoid. Is PayPal safe? How do I get my money out? How many referral bonuses have you earned? What happens to my money if PayPal shuts down?
proof that PayPal was beginning to take root in eBay’s online community
my marketing campaign had already planted the seed. Now it was time for us to help it grow.
If we could increase our number of accounts to reach critical mass before our competitors, the resulting network effect would freeze out any opponents. Potential users would not waste time signing up for multiple accounts with different payment services if PayPal were ubiquitous. But if we failed and another service outpaced us, then there probably would be nothing we could do to catch up.
“For the next several months,” Luke continued, “all of our work is going to focus on eBay. For marketing, all of our direct mails should be to auction users. And, since we can’t buy advertising directly on eBay’s site, we’ll get online banners and magazine ads in other places where eBay users go.
PayPal reached a significant milestone. In late January we registered our 100,000th account. As a countdown to the event, our receptionist pasted a large thermometer made out of white construction paper to the wall of our lobby. Each day she used a red marker to fill in another portion of the thermometer and the company watched as we drew closer to the 100,000 figure at the top. When PayPal finally reached the mark, we held a party complete with six cakes—one sported the number “1” on top, and the other five each had a “0.”
...
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Eric M. Jackson's "The PayPal Wars" stands as one of the finest accounts yet written of the heady days of dot-com in 2000 and 2001. What makes Jackson's account so imminently readable is the author's sense of humility, and his reflexive empathy for the travails of his colleagues at PayPal.
Originally recruited away from Anderson by Peter Theil, Jackson writes from the vantage of one accustomed to the ways of the old economy-- strict hierarchy, clearly-defined roles, and an emphasis on structure. Jackson reported to work his first day to find that no one at PayPal was aware he had been hired; after getting over his initial panic, he quickly learned that the new economy prized a different set of values: speed, flexibility, egalitarianism, and, above all, talent. Despite having no prior marketing experience, Jackson quickly learned the ropes and ascended to a position of prominence within the fledgling organization.
Jackson's observations ring true to anyone fortunate enough to have worked in a high-growth tech startup:
* Customer service was playing catch-up to the company's emphasis on growth, with unanswered email queues exceeding 100,000 at times.
* Simple search queries used to generate internal usage reports would threaten to crash the public site due to scaling problems.
* Engineers sparred over which platform to use (Oracle or NT), ultimately developing for both in parallel.
* Upper-management preoccupied itself with inking biz dev deals to increase growth instead of fixing serious site problems that were causing users to leave.
Throughout his narrative, Jackson pulls few punches, and writes with convincing sincerity about the strengths and weaknesses of the company he helped to create:
"I'll certainly acknowledge that our company wasn't beyond media dissection. In fact, we deserved it! We had racked up $92 million in operating losses through the first three quarters of the year against revenues of just $6 million. CNET, The Red Herring, and other media outlets had every right to sink their teeth into a company with such a dangerous burn rate..."
Peter Theil emerges as a true visionary, having originally conceived of PayPal as a way of allowing citizens across the world bypass currency-devaluing actions of their local governments by letting them transfer savings into foreign-denominated currency. While this vision never came to pass, the encompassing nature of his vision seized the imagination of those who toiled to make PayPal succeed. Theil also had the financial acumen to realize that unless he closed his venture round quickly in the spring of 2001, the continuing slide of NASDAQ would scare away the investors he had so carefully brought to the table. He closed a $100 million round just in time by instructing the investment bank not to haggle over the company's valuation-- just to close the round as fast as possible. Had he waited even a few more days, his investors would have fled to safety, and PayPal would have run out of cash.
Some of the most delicious passages of Jackson's account are those which describe the culture of PayPal's ultimate buyer, eBay:
"EBay employees seemed trained to make phone calls to everyone who might have even the remotest interest in the matter and invite them to the yet-to-be-scheduled meeting. After at least two dozen invitations had been extended, a meeting time and location would be scheduled about a week in advance. The following day, like clockwork, the meeting would be rescheduled because of a calendar conflict of a peripheral stakeholder. After several rounds of schedule shuffling, attendees filing into the summit would be handed a thick set of PowerPoint slides filled with bullet points, tables, and an aphorism or two... The duration of the meeting would then be devoted to wading through the voluminous set of slides, with the usual outcome being an agreement to set up a follow-up meeting wo that the issues raised by the slides could be further discussed."
Ultimately, the usurpation of PayPal's innovative culture for eBay's beauracratic one led Jackson, as well as most of his fellow PayPal colleagues, to depart. The strength of PayPal's bench can be readily seen by considering what its members did later--
* Peter Theil became a major figure in the venture arena, where he helped build the then-nascent social network, Facebook.
* Reid Hoffman went on to take the helm of LinkedIn, which has since gone through a successful IPO.
* Chad Hurley and Steve Chen founded YouTube (later acquired by Google).
* Jeremy Stoppleman and Russel Simmons founded Yelp.
* Premal Shah founded Kiva.
* Dave McClure founded SimplyHired.
One of the few downsides of Jackson's compelling account is his insertion of political positions which he presents as if his readers will naturally share his outlook. While not over-wrought, his endorsements of Milton Freidman, Bernie Goldberg, and his sweeping denunciations of regulatory agencies wear on the reader who is otherwise inclined to affirm Jackson's observations on life in a high-growth company. In an afterword which describes the threat posed to eBay and PayPal from an ascendent Google, Jackson intones that "Google's management appears to be overwhelmingly left-wing"-- a pronouncement which is intended to spook the reader.
Despite his politics, Eric Jackson has penned a wonderful time-capsule of the heady days of the dot-com blast. If you are looking for a highly-readable volume which avoids the standard cant while offering a first-hand account of what life is really like in a startup, look no further.
Originally recruited away from Anderson by Peter Theil, Jackson writes from the vantage of one accustomed to the ways of the old economy-- strict hierarchy, clearly-defined roles, and an emphasis on structure. Jackson reported to work his first day to find that no one at PayPal was aware he had been hired; after getting over his initial panic, he quickly learned that the new economy prized a different set of values: speed, flexibility, egalitarianism, and, above all, talent. Despite having no prior marketing experience, Jackson quickly learned the ropes and ascended to a position of prominence within the fledgling organization.
Jackson's observations ring true to anyone fortunate enough to have worked in a high-growth tech startup:
* Customer service was playing catch-up to the company's emphasis on growth, with unanswered email queues exceeding 100,000 at times.
* Simple search queries used to generate internal usage reports would threaten to crash the public site due to scaling problems.
* Engineers sparred over which platform to use (Oracle or NT), ultimately developing for both in parallel.
* Upper-management preoccupied itself with inking biz dev deals to increase growth instead of fixing serious site problems that were causing users to leave.
Throughout his narrative, Jackson pulls few punches, and writes with convincing sincerity about the strengths and weaknesses of the company he helped to create:
"I'll certainly acknowledge that our company wasn't beyond media dissection. In fact, we deserved it! We had racked up $92 million in operating losses through the first three quarters of the year against revenues of just $6 million. CNET, The Red Herring, and other media outlets had every right to sink their teeth into a company with such a dangerous burn rate..."
Peter Theil emerges as a true visionary, having originally conceived of PayPal as a way of allowing citizens across the world bypass currency-devaluing actions of their local governments by letting them transfer savings into foreign-denominated currency. While this vision never came to pass, the encompassing nature of his vision seized the imagination of those who toiled to make PayPal succeed. Theil also had the financial acumen to realize that unless he closed his venture round quickly in the spring of 2001, the continuing slide of NASDAQ would scare away the investors he had so carefully brought to the table. He closed a $100 million round just in time by instructing the investment bank not to haggle over the company's valuation-- just to close the round as fast as possible. Had he waited even a few more days, his investors would have fled to safety, and PayPal would have run out of cash.
Some of the most delicious passages of Jackson's account are those which describe the culture of PayPal's ultimate buyer, eBay:
"EBay employees seemed trained to make phone calls to everyone who might have even the remotest interest in the matter and invite them to the yet-to-be-scheduled meeting. After at least two dozen invitations had been extended, a meeting time and location would be scheduled about a week in advance. The following day, like clockwork, the meeting would be rescheduled because of a calendar conflict of a peripheral stakeholder. After several rounds of schedule shuffling, attendees filing into the summit would be handed a thick set of PowerPoint slides filled with bullet points, tables, and an aphorism or two... The duration of the meeting would then be devoted to wading through the voluminous set of slides, with the usual outcome being an agreement to set up a follow-up meeting wo that the issues raised by the slides could be further discussed."
Ultimately, the usurpation of PayPal's innovative culture for eBay's beauracratic one led Jackson, as well as most of his fellow PayPal colleagues, to depart. The strength of PayPal's bench can be readily seen by considering what its members did later--
* Peter Theil became a major figure in the venture arena, where he helped build the then-nascent social network, Facebook.
* Reid Hoffman went on to take the helm of LinkedIn, which has since gone through a successful IPO.
* Chad Hurley and Steve Chen founded YouTube (later acquired by Google).
* Jeremy Stoppleman and Russel Simmons founded Yelp.
* Premal Shah founded Kiva.
* Dave McClure founded SimplyHired.
One of the few downsides of Jackson's compelling account is his insertion of political positions which he presents as if his readers will naturally share his outlook. While not over-wrought, his endorsements of Milton Freidman, Bernie Goldberg, and his sweeping denunciations of regulatory agencies wear on the reader who is otherwise inclined to affirm Jackson's observations on life in a high-growth company. In an afterword which describes the threat posed to eBay and PayPal from an ascendent Google, Jackson intones that "Google's management appears to be overwhelmingly left-wing"-- a pronouncement which is intended to spook the reader.
Despite his politics, Eric Jackson has penned a wonderful time-capsule of the heady days of the dot-com blast. If you are looking for a highly-readable volume which avoids the standard cant while offering a first-hand account of what life is really like in a startup, look no further.
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