The PayPal Mafia

May 26 2012

 

After eBay acquired PayPal, the members of the PayPal executive team each moved on to new projects but stayed connected, investing in one another’s companies, hiring one another, sharing office space, and the like. There are no membership dues, no secret handshakes, no monthly meetings; just informal collaboration. Yet these connections have spawned some of the most successful projects in Silicon Valley. As a result, the group got the name “the PayPal mafia.”

What is it about this network that makes it such a uniquely rich source of opportunities?

First, each individual is high-quality. This is fundamental: A group is only as good as its members. The network is only as good as its nodes. Evaluate a group by evaluating the individual people.

Second, the gang has something in common—the shared experience of PayPal, and the interests and values that led everyone there. Shared experiences lead to trust, which leads to people’s sharing information and opportunities. All opportunity-rich networks have a common denominator. Conference attendees are all interested in the topic of the conference; a congregation at a church shares a faith; Franklin’s Junto members were all intellectually curious.

Third, there’s geographic density. Collaboration happens best when information and ideas can bounce around quickly to and from all the interested parties, ideally in the same physical place. That’s why Franklin assembled a small group of friends in a single room in Philadelphia and a single coffeehouse in London. It’s why Rotary Clubs were initially capped at twelve members.

Fourth, there’s a strong ethos of sharing and cooperation. For a network to be valuable, everyone has got to want to invest in that network by pushing information and ideas through it. In her book explaining how California semiconductor companies surpassed those in Boston in the 1980s, AnnaLee Saxenian from UC Berkeley’s School of Information says West Coast entrepreneurs were inclined to share their discoveries with others, even with competitors, in the spirit of collective progress. In the PayPal group there’s a similar dynamic. Folks stay in touch and collaborate, even in cases where there’s competition (e.g., there are multiple VCs who sometimes compete for the same deals).