Paypal vs MailChimp
A minor lesson in wealth creation
It struck me recently that in west coast start up culture, it’s much more common for early employees to get the benefit of equity as part of their compensation.
Then follows legendary stories of people that were non-founders like:
Jeff Skoll - one of the first employees and the first president of eBay. He joined the company in 1996, just a year after it was founded, and played a key role in its early growth. Skoll's net worth is estimated at around $6 billion. He has also been active in philanthropy and founded the Skoll Foundation, which supports social entrepreneurs and organizations around the world.
Steve Ballmer - The 24th employee of Microsoft and later became its CEO. His net worth is estimated at around $93 billion, largely due to his stock holdings in Microsoft.
Susan Wojcicki - Google's first marketing manager and is now the CEO of YouTube. She is estimated to be worth around $580 million, mostly from her stock options in Google.
Sheryl Sandberg - An early employee at Google and later became the COO of Facebook. Her net worth is estimated to be around $1.9 billion, largely due to her stock holdings in Facebook.
Chamath Palihapitiya - An early employee and executive at Facebook, where he helped to develop the company's growth strategy and played a key role in its early success. After leaving Facebook in 2011, Palihapitiya founded the venture capital firm Social Capital, which has invested in a number of successful startups including Slack, Yammer, and Box.
In contrast, enter the story of MailChimp.
Mailchimp is an email marketing service that was founded in 2001. The company grew steadily over the years and eventually became one of the largest email marketing platforms in the world. In 2021, the company was sold to Intuit for $12 billion. While the sale of Mailchimp resulted in a significant sum of money, the proceeds only benefited a few people, namely the company's founders and investors.
On the other hand, PayPal was founded in 1998 and quickly became one of the most popular online payment platforms in the world. In 2002, the company was acquired by eBay for $1.5 billion. The sale of PayPal resulted in a significant amount of money being distributed to a large number of people, including the company's founders, investors, and employees. Many of these individuals went on to start new businesses and invest in other companies, creating a ripple effect that helped to stimulate the economy and create jobs.
The difference in the distribution of proceeds between the sale of Mailchimp and the sale of PayPal highlights an important issue in the technology industry. While the sale of a company can result in a significant amount of money being exchanged, the benefits of that sale are often concentrated in the hands of a few individuals. This can have negative consequences for the broader economy, as the concentration of wealth does nothing to promote further economic growth.
In contrast, when the benefits of a sale are distributed more widely, as was the case with PayPal, the positive effects can be far-reaching. The individuals who receive the proceeds from the sale are able to invest in new businesses and technologies, creating a cycle of innovation and growth that benefits the economy as a whole.
By way of example, some of the legendary PayPal mafia:
Elon Musk - While Elon Musk is perhaps best known for his work at Tesla and SpaceX, he actually got his start in the tech industry as a co-founder of PayPal ( or emerald mines, depending on your source). After the sale of PayPal to eBay, Musk went on to start several other successful companies, including Tesla, SpaceX, and SolarCity.
Peter Thiel - After the sale of PayPal, Thiel went on to become a prominent venture capitalist and tech entrepreneur, founding several successful companies, including Palantir Technologies and Founders Fund.
Reid Hoffman - Reid Hoffman was an early employee at PayPal and played a key role in the company's growth. After the sale of PayPal, Hoffman went on to co-found LinkedIn, which has since become one of the most popular professional networking platforms in the world. His net worth is estimated to be around $4 billion, largely due to his early involvement in these companies. He also produces a fine podcast called, “Masters of Scale,” which, hey, I’ve listened to.
Max Levchin - A co-founder of PayPal who played a key role in developing the company's anti-fraud technology. After the sale of PayPal, Levchin went on to start several other successful companies, including Slide and Affirm.
Chad Hurley and Steve Chen - Both early employees at PayPal who played key roles in the company's growth. After the sale of PayPal, they went on to co-found YouTube, which has since become one of the most popular video-sharing platforms in the world.
In conclusion, the sale of Mailchimp benefited hardly anyone, and the sale of PayPal created icons that went on to create other successful companies.
Could the solution to wealth disparity in the world lie in the way we distribute equity among early stakeholders?
Maybe if the pie was split early and widely, the benefits of technological innovation could be more widely shared, rather than being concentrated in the hands of a privileged few.