PayPal's Palo Alto years

PayPal was born from a merger of two Palo Alto startups that had been fighting over the same customers. For about three years, from late 1998 to 2002, the company worked out of Palo Alto offices while it figured out how to let people send money by email. Then it moved to Mountain View, sold itself to eBay and scattered its early staff across Silicon Valley. Those people went on to found or fund an astonishing list of companies.

This profile covers the Palo Alto years, the offices we could confirm and the network that came out of them.

Confinity, 1998

Confinity was founded in December 1998 by Max Levchin, Peter Thiel, Luke Nosek, Ken Howery and Yu Pan. Levchin was a young cryptography programmer. Thiel was a Stanford graduate running a small investment fund. Their first idea was security software for handheld computers such as the Palm Pilot, including a way to beam money from one device to another.

That idea did not catch on, but a related one did. In July 1999 Confinity announced PayPal, a service for sending money over the internet. It opened to the public later that year. Users could send payments to anyone with an email address. The service grew fast, especially among sellers on eBay.

Confinity's second office was at 165 University Avenue in downtown Palo Alto, the same building where Google worked in 1999. Our Google profile tells the story of that building, often called the lucky building.

Why Palo Alto

Both founding teams had strong ties to the area. Thiel had studied at Stanford as an undergraduate and law student. Many early engineers came from Stanford or from the University of Illinois, where Levchin had studied. Downtown Palo Alto in 1999 was crowded with internet startups, so office space was tight and expensive. That is partly why the young companies moved so often.

The location also put PayPal close to its most important early partner and rival. eBay was headquartered in San Jose, a short drive south. Its sellers became many of PayPal's heaviest early users. eBay ran a competing payment service of its own before deciding to buy PayPal instead.

X.com, 1999

X.com was incorporated in March 1999 by Elon Musk, fresh from selling his first company, Zip2. His co-founders were Harris Fricker, Christopher Payne and Ed Ho. X.com planned to be a full online bank and moved into an office in Palo Alto. By December 1999 it had added a way to send payments by email, which put it in direct competition with Confinity.

We could not confirm the street address of X.com's Palo Alto office from a primary source, so it is not listed here.

The merger, 2000

The two companies were spending heavily to win the same users. In February 2000 they began talking. The merger was announced on March 2, 2000. It was completed on March 30, 2000, with X.com as the surviving company. For a while the combined business kept the X.com name.

Leadership changed quickly. Musk became chief executive in the spring of 2000. In September 2000, while he was traveling, the board replaced him with Thiel. In October the company dropped its banking plans to focus on payments. It formally changed its name to PayPal, Inc. in February 2001 and switched its website from x.com to paypal.com that June. Musk bought the x.com domain back from PayPal in 2017.

In May 2000 the company opened a customer service and operations center in Omaha, Nebraska. Engineering, product and leadership stayed in the Bay Area.

Embarcadero Road and the move to Mountain View

By the time PayPal filed to go public in 2001, its headquarters was at 1840 Embarcadero Road in Palo Alto. Its annual report for 2001 described it as a leased headquarters of about 22,000 square feet.

The company was already planning to leave. In August 2001 PayPal signed a lease for about 50,000 square feet of office space in Mountain View and said it expected to move its headquarters there in the second quarter of 2002. By the time eBay filed its merger documents later in 2002, PayPal's headquarters address was 303 Bryant Street in Mountain View.

The IPO and eBay

PayPal went public on February 15, 2002, in the shaky market after the dot-com crash. Months later, on July 8, 2002, eBay announced it would buy PayPal in an all-stock deal valued at about $1.5 billion. The purchase closed in October 2002.

PayPal stayed part of eBay for 13 years. It moved its headquarters to San Jose along the way. On July 20, 2015, eBay spun PayPal off and it began trading again on Nasdaq as PYPL. PayPal remains headquartered on North First Street in San Jose.

The PayPal mafia

After the eBay deal, many early PayPal employees left. A large number went on to found or fund major companies. In 2007 Fortune magazine photographed a group of them dressed as gangsters. The nickname "PayPal mafia" stuck. Some of the best known names:

• Peter Thiel made the first outside investment in Facebook, co-founded Palantir and started the venture firm Founders Fund.
• Elon Musk founded SpaceX and became the leading force at Tesla.
• Reid Hoffman co-founded LinkedIn.
• Chad Hurley, Steve Chen and Jawed Karim founded YouTube.
• Jeremy Stoppelman and Russel Simmons founded Yelp.
• David Sacks founded Yammer.
• Max Levchin founded Slide and later Affirm.
• Luke Nosek and Ken Howery co-founded Founders Fund with Thiel.

The network mattered for Palo Alto. Thiel was the first outside investor in Facebook during its first Palo Alto summer, as our Facebook profile describes. Palantir grew up downtown.

Seeing PayPal's Palo Alto sites

There is no PayPal marker in Palo Alto. You can walk past 165 University Avenue in downtown Palo Alto on the way from the Caltrain station. The Embarcadero Road office is a private building.

For the full route, use our famous tech addresses tour. For other companies with a Palo Alto chapter, see the companies guide.

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