When eBay (EBAY) agreed to buy PayPal for $1.5 billion in the summer of 2002, the purchase had two dramatic effects.
First, adding the world’s premier electronic payment method gave eBay the muscle it needed to corner the online auction market, which it proceeded to do.
(At the time, the majority of auction winners were using PayPal to facilitate their payments rather than eBay’s own service, Billpoint. eBay viewed this as an embarrassing defeat.)
Second, the acquisition hatched the “PayPal Mafia.”
Twelve years later, the PayPal Mafia is one of the most awesomely disruptive forces the world has ever known. In fact, if your portfolio doesn’t have exposure to the PayPal Mafia, well… you’re missing out on a fortune.
The PayPal Mafia is a term used to describe the Founding Fathers of PayPal, who left the company in the wake of the eBay acquisition.
As the story goes, eBay’s rigid corporate culture was a dreadfully bad fit for the prodigies behind PayPal.
According to former PayPal CEO, David Sacks, eBay didn’t give a damn about PayPal’s founders, and made no genuine effort to retain them.
Do you think eBay would like to re-think that decision?
The PayPal Mafia has since directly spawned seven different companies valued at over a billion dollars, including…
1.) Tesla Motors (TSLA)
2.) LinkedIn (LNKD)
5.) Yelp (YELP)
These seven companies enjoy a collective net worth of roughly $75 billion.
So who, exactly, is the PayPal Mafia? I compiled a list below, beginning with Peter Thiel, known as “the Don” of the PayPal Mafia.
The PayPal Mafia
Peter Thiel, Founder and former CEO.
Max Levchin, Founder and former Chief Technology Officer.
Scott Banister, former IronPort CEO and PayPal board member.
David Sacks, former PayPal CEO who later founded Geni.com and Yammer.
Roelof Botha, former PayPal CEO who later became a partner of venture capital firm, Sequoia Capital.
Steve Chen, former PayPal engineer who co-founded YouTube.
Jawed Karim, former PayPal engineer who co-founded YouTube.
Chad Hurley, former PayPal web designer who co-founded YouTube.
Elon Musk, an early PayPal angel who later co-founded Tesla and SpaceX, and is the Chairman of SolarCity.
Russel Simmons, former PayPal engineer who co-founded Yelp.
Jeremy Stoppelman, former VP of Technology at PayPal who co-founded Yelp.
Reid Hoffman, former Executive VP who later founded LinkedIn and was an early investor in Facebook (FB).
Yishan Wong, a former Engineering Manager at PayPal, who later worked at Facebook and became the CEO of reddit.
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But for the scope of this article, let’s pay particular attention to the PayPal Mafia’s crown prince, Peter Thiel, who has ambitions of owning the cloud.
Of course, Microsoft (MSFT) has similar ambitions.
So who will win?
Well, Thiel is pouring billions into a tiny New Zealand company trading on the Australian Securities Exchange, Xero Limited (XRO.AX).
Its flagship product is a cloud-based software platform meant to disrupt the accounting industry presently dominated by Inuit’s (INTU) QuickBooks.
Although it’s not yet profitable, Xero already has 300,000 paying customers around the globe and has recently been valued at over $2 billion.
Revenue grew by nearly 100% last year, and the company keeps gobbling up market share with every passing quarter.
With Thiel at the helm, Xero is one charging bull I’d recommend climbing aboard. Shares are off their mid-March highs, too, which makes now the perfect time to pull the trigger.
Onward and Upward,
Founder, Wall Street Daily
More Storylines Impacting Markets
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In a classic case of unintended consequences, central bank efforts to clamp down on interest rates may have cost global governments up to $250 billion in lost interest income. So, in an effort to replace this income, the Official Monetary and Financial Institutions Forum (OMFIF) now reports that global public investors, including central banks, have purchased more than $1 trillion in equities since the financial crisis in 2008.
What’s worse is that this number could go much higher with Chinese equity purchases…
China’s State Administration of Foreign Exchange is now the world’s largest public holder of equities, with some $3.9 trillion under management. Of course, this trend could easily lead to inflated asset prices – and explain why the market keeps rising on dreadful economic news.
Record Meat Prices
Despite Fed Chief Janet Yellen’s comments to the contrary, rising inflation isn’t a “noisy” data point, but rather an increasingly serious problem for most Americans.
The BLS index of meats, poultry, fish and eggs just hit an all-time high at 252.8 – a rise of 7.7% since this time last year.
More broadly speaking, consumer prices are registering their sharpest price increases in more than 15 months – showing escalating prices on a variety of goods – from airline ticket prices to utility costs.
Yellen’s continued insistence that the fight against apoplithorismosphobia (or, the fear of monetary deflation) is important means that America’s struggle to put food on the table will continue to be the stated policy of the Federal Reserve.