Overview

In the summer of 2005, a few friends in the Silicon Valley area got together for a backyard barbecue - one of many that probably happened that day across that region of California and across the country. This barbecue, however, would end up being a milestone event that led to a dramatic change in the history of technology and in the way individuals interact online. During the get-together, Jawed Karim, a then-twenty-six-year-old computer science programmer, showed a website he was working on to Keith Rabois, a man ten years his senior. Rabois was impressed with the website and told another friend, Roelof Botha, who happened to be a partner at the venture capital firm Sequoia Capital.Botha, also impressed, arranged a meeting with Karim and the other men working on the project. A few months later, Sequoia had invested $3.5 million in the new website. Just a fewweeks after that, the website officially launched for all to use, even though over 8 million people were already visiting it daily.Post-launch, the website would soar. Within a year of the first investment from Sequoia, the search engine powerhouse Google jumped in and purchased the website for $1.65 billion. The website, YouTube.com, would continue its rocketlike trajectory even after purchase, eventually becoming the second most visited website in the world. From the backyard cookout to the Google buyout, Karim and his friends had taken YouTube from a one-video demo website to a $1.65 billion company in just eighteen months. Needless to say, the investment from Sequoia Capital helped them get there, and it helped Sequoia make a substantial profit. It seems like an amazing fantasy story, a near-fluke, except that YouTube isn't the only company that has received significant investment based on a small idea. It's not the only company to go from idea to billion-dollar valuation in less than two years. It's not even the only company that got its lucky break at a small backyard get-together.The truth is, those kinds of things happen all the time when the mafia gets together.No, not that mafia. The PayPal Mafia.Jawed Karim and his YouTube cofounders, Steve Chen and Chad Hurley, along with friend Keith Rabois and venture capitalist Roelof Bathoa, all worked together at the financial start-up PayPal before it was acquired by eBay for $1.5 billion in 2002. But they aren't the entire PayPal Mafia, not even a majority. Other members include Peter Thiel, Elon Musk, Reid Hoffman, Andrew McCormack, David Sacks, Ken Howery, Max Levchin, Russell Simmons, and a few hundred more.The companies the Mafia has started or invested in are renowned, including LinkedIn, Yelp, Yammer, Keva, Palantir, Slide, Flickr, Digg, Mozilla, Tesla, SpaceX, and even Facebook. It's an incredible story not just of how start-up genius loves company, but of how those individuals who are plugged into a network can have a dramatic effect on not just their own careers but an entire industry.The PayPal Mafia got its start, of course, at PayPal. Founded by Max Levchin, Luke Nosek, and Peter Thiel, PayPal started to send mobile payments from person to person using Palm Pilots and other personal digital assistants (PDAs). From the beginning, the company focused on recruiting through its founders' networks and then building a company where everyone felt connected. That meant heavy recruiting from nearby Stanford University (Thiel's alma mater) and also from the University of Illinois at Urbana-Champaign (Levchin's alma mater). We didn't only hire our friends, said Thiel. But we did hire people who we thought we could become really good friends with. PayPal grew fast, and was eventually acquired by eBay. While the acquisition worked out well financially for PayPal employees, it didn't work out as well culturally. PayPal was already a misfit in the Silicon Valley culture of the late 1990s and early 2000s - a time when start-up mythology wasn't as prominent as it is today...

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