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Why did so many successful entrepreneurs and startups come out of PayPal? Answered by Insiders

by Vincent Chan on Jun 28, 2010


Why did so many successful entrepreneurs and startups come out of PayPal? I long have been fascinated by the extraordinary achievement from the ex-Paypal team and wonder about the reasons behind their success. In the past, mass media tried to answer this question several times but still couldn’t give us a clear answer.

I once asked David Sacks the same question during an event in Los Angeles. He told me the secret is that Paypal has built a “scrappy” culture. No matter what problems they faced, they would find a way to solve them. I kind of got the idea, but was still confused about the execution details.

So when I saw some of the past Paypal employees answering this question on Quora, I was super excited! After all, they should be the only ones who can tell people the inside stories.

Below are some highlights of their answers. *If you want to check out the sources or leave your comments, please go to here and here.

On Talent Management

“Peter and Max assembled an unusual critical mass of entrepreneurial talent, primarily due to their ability to recognize young people with extraordinary ability (the median age of *execs* on the S1 filing was 30). But the poor economy allowed us to close an abnormal number of offers, as virtually nobody other than eBay and (in part) google was hiring in 2000-02.” (by Keith Rabois, former Executive Vice President of Paypal)

Extreme Focus (driven by Peter): Peter required that everyone be tasked with exactly one priority. He would refuse to discuss virtually anything else with you except what was currently assigned as your #1 initiative. Even our annual review forms in 2001 required each employee to identify their single most valuable contribution to the company.” (by Keith Rabois, former Executive Vice President of Paypal)

Dedication to individual accomplishment: Teams were almost considered socialist institutions. Most great innovations at PayPal were driven by one person who then conscripted others to support, adopt, implement the new idea. If you identified the 8-12 most critical innovations at PayPal (or perhaps even the most important 25), almost every one had a single person inspire it (and often it drive it to implementation). As a result, David enforced an anti-meeting culture where any meeting that included more than 3-4 people was deemed suspect and subject to immediate adjournment if he gauged it inefficient. Our annual review forms in 2002 included a direction to rate the employee on “avoids imposing on others’ time, e.g. scheduling unnecessary meetings.” (by Keith Rabois, former Executive Vice President of Paypal)

Refusal to accept constraints, external or internal:We were expected to pursue our #1 priority with extreme dispatch (NOW) and vigor. To borrow an apt phrase, employees were expected to “come to work every day willing to be fired, to circumvent any order aimed at stopping your dream.” Jeremy Stoppelman has relayed elsewhere the story about an email he sent around criticizing management that he expected to get him fired and instead got him promoted. Peter did not accept no for answer: If you couldn’t solve the problem, someone else would be soon assigned to do it.” (by Keith Rabois, former Executive Vice President of Paypal)

Driven problem solvers: PayPal had a strong bias toward hiring (and promoting / encouraging, as Keith mentions) smart, driven problem solvers, rather than subject matter experts. Very few of the top performers at the company had any prior experience with payments, and many of the best employees had little or no prior background building Internet products. I worked on the fraud analytics team at PayPal, and most of our best people had never before done anything related to fraud detection. If he’d approached things “traditionally”, Max would have gone out and hired people who had been building logistic regression models for banks for 20 years but never innovated, and fraud losses would likely have swallowed the company.” (by Mike Greenfield, former Sr. Fraud R&D Scientist of Paypal)

Self-sufficiencyindividuals and small teams were given fairly complex objectives and expected to figure out how to achieve them on their own. If you needed to integrate with an outside vendor, you picked up the phone yourself and called; you didn’t wait for a BD person to become available. You did (the first version of) mockups and wireframes yourself; you didn’t wait for a designer to become available. You wrote (the first draft of) site copy yourself; you didn’t wait for a content writer.” (by Yee Lee, former Product & BU GM of Paypal)

On Culture & Ideology

Extreme bias towards actionearly PayPal was simply a really *productive* workplace. This was partly driven by the culture of self-sufficiency. PayPal is and was, after all, a web service; and the company managed to ship prodigious amounts of relatively high-quality web software for a lot of years in a row early on. Yes, we had the usual politics between functional groups, but either individual heroes or small, high-trust teams more often than not found ways to deliver projects on-time.” (by Yee Lee, former Product & BU GM of Paypal)

Willingness to try – even in a data-driven culture, you’ll always run in to folks who either don’t believe you have collected the right supporting data for a given decision or who just aren’t comfortable when data contradicts their gut feeling. In many companies, those individuals would be the death of decision-making. At PayPal, I felt like you could almost always get someone to give it a *try* and then let performance data tell us whether to maintain the decision or rollback.” (by Yee Lee, former Product & BU GM of Paypal)

Data-driven decision making – PayPal was filled with smart, opinionated people who were often at logger-heads. The way to win arguments was to bring data to bear. So you never started a sentence like this “I feel like it’s a problem that our users can’t do X”, instead you’d do your homework first and then come to the table with “35% of our [insert some key metric here] are caused by the lack of X functionality…” (by Yee Lee, former Product & BU GM of Paypal)

Radical transparency on metrics: All employees were expected to be facile with the metrics driving the business. Otherwise, how could one expect each employee to make rational calculations and decisions on their own every day? To enforce this norm, almost every all-hands meeting consisted of distributing a printed Excel spreadsheet to the assembled masses and Peter conducting a line by line review of our performance (this is only a modest exaggeration).” (by Keith Rabois, former Executive Vice President of Paypal)

Vigorous debate, often via email: Almost every important issue had champions and critics. These were normally resolved not by official edict but by a vigorous debate that could be very intense. Being able to articulate and defend a strategy or product in a succinct, compelling manner with empirical analysis and withstand a withering critique was a key attribute of almost every key contributor. I still recall the trepidation I confronted when I was informed that I needed to defend the feasibility of my favorite “baby” to Max for the first time.” (by Keith Rabois, former Executive Vice President of Paypal)

Extreme Pressure – PayPal was a very difficult business with many major issues to solve. We were able to see our colleagues work under extreme pressure and hence we learned who we could rely on and trust.” (by Keith Rabois, former Executive Vice President of Paypal)


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