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Paypal – Say No To Traditional Payment Methods

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Elon MuskOnline transaction is a boon in our everyday life. It has made our life better by saving us time and making transactions by a few clicks. One does not need to run to the bank or ATM in the eleventh hour for withdrawing cash. Applications like GooglePay, PhonePe have become some of the most popular interfaces for money transactions. But, way before these applications came into play, an American company, PayPal ruled the market.

Founded in 1998, PayPal serves the entire world with its payment services. It was a subsidiary of eBay for a long time. PayPal has launched many divisions of online payment in the last twenty years. The founders of the company are Elon Musk, Ken Howery, Luke Nosek, Max Levchin, Peter Thiel and Yu Pan. Currently, Dan Schulman serves as the President and CEO of the company. The company’s headquarters is based in San Jose, California.

Founders

The world-famous tech pro, investor and entrepreneur, Elon Musk founded more than just one company. PayPal was his third start-up after co-founding Zip2 with his brother, Kimbal followed by founding X.com. Musk founded SpaceX, The Boring Company, Neuralink, and many more giant businesses.

Howery went to Stanford University and acquired a Bachelor’s degree in Economics. While he was a university student, he served as the managing editor of The Standard Review. Howery co-founded PayPal the very year he graduated. He was made Director of corporate development for eBay after it acquired PayPal.

Nosek is a computer engineer who co-founded SponsorNet New Media prior to co-founding PayPal. He served as PayPal’s vice president of marketing and strategy until the company was acquired by eBay.

Levchin has a degree in computer science who co-founded PayPal right after completing his graduation. He has also co-founded Slide, HVF, and Affirm. Levchin is mostly known for his efforts in managing fraud and contributions in CAPTCHA response.

The great venture capitalist and investor, Peter Thiel has a degree in law from Stanford. Before becoming a venture capitalist, Thiel served as a security lawyer. Thiel is a board member of Facebook, a partner at Founders Fund and a great philanthropist.

Pan has a degree in computer science from the University of Illinois. Pan served as a Google employee prior to co-founding PayPal. He was also hired by Youtube as a software engineer.

Early History

Back in 1998, the company was launched by the name Confinity. Confinity was founded to provide security software which later launched its money transfer service in 1999. BlueRun Ventures provided the initial funding for this new company.

After a year, Confinity merged with X.com, Musk’s online banking start-up. X.com had many other online payment services which Musk decided to shut down and focus exclusively on PayPal. In 2001, the company gained popularity as PayPal and not X.com anymore. It went public in 2002.

The major acquisition

In 3rd October 2002, eBay acquired PayPal for $1.5 billion. It was the biggest turning point in the success story of PayPal. After this business deal was closed, PayPal payments increased exponentially. Most of the eBay users paid through PayPal as it appeared as the default choice. Five years from buying PayPal, the company’s annual revenue summed up to $1.8 billion. In 2008, PayPal made two big acquisitions including Fraud Science (for managing frauds) and Bill Me Later.

Success of PayPal

The company reached 100 million active users from more than twenty-five different countries by 2010. Till now PayPal only provided online money transactions. In 2011, the company decided to provide offline services. The company wanted to deliver the advantage of paying in retail shops via PayPal. For launching this, PayPal came into a partnership with Discover Card in 2012. After the offline scheme was launched, it reached more than 7 million retail shops. This led the volume of PayPal’s payment transaction to $145 billion.

An independent company

In 2014, the company decided to establish itself independently. The spin-off was finally completed on 18th July 2015. After this agreement, Dan Schulman was made the CEO and President of the company and John Donahoe was declared as the Chairman.

he first acquisition made by PayPal as an independent entity was Xoom Corporation. Other acquisitions also include Hyperwallet, Simility, and GoPay, etc. The company today has more than 170 million active users and 21,000 employees approximately.

Pierre Omidyar – The Founder of eBay

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Brilliant ideas are born out of the curious minds. The ideas or problems often roam around and everyone fail to notice them except some brilliant curious minds. These brilliant minds are the ones responsible for smartphones, computers, airplanes , tv, refrigerators; literally everything that has made our daily life so easy. One such extra-ordinary mind is Pierre Omidyar, a man who turned into a billionaire just at the age of 31. Omidyar, for the first time, brought the auction business on the online platform and connected hundreds of thousands of buyers and sellers through his website – eBay.

Pierre Omidyar is a French born Iranian American businessman and philanthropist. Born in 1967, Pierre’s interest in computers began from high school. He would skip the gym sessions to spend that time at the computer lab. This behavior got him his first job instead of teacher’s scolding. At the age of 14 he was put on the task to create a program that would generate catalogue cards for the library by the principal. Starting from a mere $6 per hour and earning almost 8 billion, Pierre has set a wonderful example for the whole world.

Pierre went on to Tufts University for his graduation in computer science and then joined a company to develop the Macintosh software. Before starting his software company Ink Development Corp in 1991, Pierre worked for Apple’s subsidiary Claris. His Ink Development Corp was purchased by Microsoft in 1996 and also changed its name to eShop. Just a year before that is in 1995 a multi-billion dollar idea had already taken birth in Pierre’s mind.

During the summer of 1995 Omidyar wrote a code for a portal called Auction Web on his own website. The purpose was to let people list the items for auction. Surprisingly, this idea grabbed stupendous attention that he had to set up a whole new website which was devoted just for online auctions. This site would later be known as eBay. With the launch of new website he also started charging a nominal fee for listing the items for auction. The charges would be anything from 25 cents to $2.

The pace at which eBay was growing made Omidyar to quit his job at General Magic, a company backed by Apple. Since then he started devoting his entire time to grow eBay. Omidyar was announced as the chairman of eBay in 1998 with Meg Whitman as the president and CEO of the company. Under Whitman’s leadership the company expanded its branches to Australia, Canada, Japan, UK, Germany, etc. At the end of 1998 the company had generated $750 million revenue and hosted 2.1 million buyers and sellers. The online auction strategy was then adopted by Amazon in 1999.

Omidyar is on the board of directors at ePeople, an online marketplace for technical support. He is married to Pamela Wesley and has three children. The couple also run a philanthropic firm Omidyar Network. This network is dedicated for journalism and launched the First Look Media along with Glenn Greenwald, the man who published government documents leaked by Edward Snowden. In 2014, the company published its first online copy The Intercept. Omidyar believes that journalism should have its own independent voice for the benefit of democratic society.

Snapdeal Story: How a deals website became top eCommerce platform of India

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Two best friends having common interest in food and maths from Delhi Public School started an offline coupons business which later turned into one of the biggest eCommerce companies of India. The CEO Kunal Bahl (alumni Wharton School, US) and COO Rohit Bansal (IIT Delhi alumni) joined hands to create Snapdeal.

Kunal Bahl, Snapdeal
Kunal Bahl, Snapdeal, Image Credit: Wikimedia.

Back in 2007 when Kunak Bahl’s US visa got rejected and was asked to return to India, he along with Rohit Bansal who was working for CapitalOne in India, decided to work together and do something different.  Kunal while studying in US did 3 different jobs to make up for his monthly expenditures. It is there where he started using food coupons so that he could get a discount and mitigate his expenses with only two jobs. This is what he along with Rohit planned to start in India.

Moneysaver to Snapdeal
They started their entrepreneurial journey in December 2006 from MoneySaver. The business model had no technology involved and was pretty simple. Snapdeal (then MoneySaver) would  get attractive deals from the restaurants, hotels, saloons etc. on the promise of getting them more customers. These coupons were printed in a discount book which they would sell to  customers.

It was a simple business model but they had a hard time getting those deals and coupons. It wasn’t easy to convince businesses to offer coupons as well as customers to buy those booklets. Not many people were aware of this coupon model in India.

As soon as a they started this business they were at a stage where they had only 20,000 Indian Rupees ($300) in their company bank account with current liabilities to the tune of 500,000 Rupees ($7000). They had to pay salaries and other dues from their personal savings and ended up only in Rs. 50,000 ($700) in their personal bank accounts in total.

They did many experiments including community coupon mailing where they would get attractive deals from the hotels, restaurants, spas, saloons etc and mail those to the community around. “It was a total waste”, says Kunal Bahl as the mailing infrastructure in India was very bad. Slowly things picked up and Snapdeal went online in 2010 with initial investment from Vani Kola’s venture capital firm.

Pivoting from deals to eCommerce 
The company was generating  good revenues and was on right track. They acquired Grabbon in 2011. On suggestion of some of the merchants involved in deal business with Snapdeal, Kunal and Rohit checked out Alibaba.com. Inspired by the success of Alibaba, Kunal Bahl took a firm decision to pivot from deals business to eCommerce. This was a tough and risky decision. However, this decision turned out to be so good that today Snapdeal is among top 3 eCommerce websites in India.

They created a marketplace for small merchants and industries so that they could directly connect with the millions of customers online. This eCommerce model was not applied by Flipkart (at that time) as it used its own huge inventory to sell and deliver products. However, later Flipkart too joined the marketplace bandwagon.

snapdeal-2011
Snapdeal in 2011

To sustain growth and compete with companies like Flipkart they raised further investments of $45 million from Nexus ventures and Bessemer venture partners. They also received a $50 million investment from from E-bay and other existing partners.

E-commerce to M-commerce
Kunal Bahl believes in constant innovation and growth. Looking at the changing user behavior and rapidly increasing mobile and internet penetration, Snapdeal created a mobile application that could work smoothly even on 2g connection. Idea was to get 50% of their orders from the mobile application.  Mobile application gave much needed push by increasing the orders, 80% of which coming only from mobile app.

With 30 million products from around 300K sellers with a reach of 6,000 towns and cities across the country, Snapdeal’s YOY growth today stands at 600%. Snapdeal counts Ratan Tata, Alibaba, SoftBank Corp, IndoUS Ventures, Intel Capital, Nexus Ventures, eBay, Kalaari Capital, Temasek Holdings etc. as their investors. Snapdeal also acquired FreeCharge, the online recharge and payment wallet in an equity deal in 2015.