Paypal Alumni Poised for Another Boost in Riches With Yelp, Facebook IPOs

Paypal Alumni Poised for Another Boost in Riches With Yelp, Facebook IPOs

The fortunes of the so-called PayPal
Mafia are poised to grow.
Jeremy Stoppelman and Max Levchin own about $200 million in
Yelp Inc. shares heading into the company’s initial public
offering, setting up the latest payday for PayPal Inc.’s former
executives. Stoppelman, co-founder and chief executive officer
of Yelp, owns 11.1 percent of the company, while Levchin, the
chairman, has 13.5 percent. The user-generated review site
announced plans last week to sell shares for $12 to $14 apiece
in an IPO, valuing Yelp at as much as $838 million.
The Yelp executives join Facebook Inc. investors Peter
Thiel and Reid Hoffman and Space Exploration Technologies Corp.
founder Elon Musk on a short list of ex-PayPal employees poised
to generate big-time riches from pending IPOs. PayPal, which
developed an online payment system, was purchased by EBay Inc.
for $1.5 billion in 2002, making many of its early employees
rich and eager to pursue new endeavors.
“PayPal did a great job of producing a very talented class
of entrepreneurs,” said Eric Jackson, the company’s first
marketing director and author of “The PayPal Wars.” “They’ve
gone on to do amazing things in Silicon Valley and the tech
industry.”
Stoppelman, 34, co-founded San Francisco-based Yelp in
2004, after serving as PayPal’s vice president of engineering
from 2000 to 2003. Levchin, 36, has been chairman of Yelp since
2004. After working as PayPal’s chief technology officer, he
founded Slide Inc., a Web application developer that was
purchased by Google Inc. in 2010.

Made Men

Both executives were among a group of colleagues who came
to be known in Silicon Valley as the PayPal Mafia. The moniker
was codified by an article in 2007 in Fortune magazine.
Vince Sollitto, a Yelp spokesman who also used to work at
PayPal, declined to comment.
Yelp, which first filed to go public in November, plans to
raise as much as $100 million in the offering. Its revenue rose
74 percent to $83.3 million last year, as the number of monthly
unique visitors jumped 67 percent to 66 million.
While Yelp will go public first, it will be dwarfed in size
by Facebook. The world’s largest social-networking site filed
earlier this month to raise $5 billion in the largest Internet
IPO on record. The Menlo Park, California-based company is
considering a valuation of $75 billion to $100 billion,
according to people familiar with the matter.

Facebook Funding

Facebook’s seed funding in 2004 came from Thiel and
Hoffman, who are now venture capitalists. Thiel, a Facebook
board member, owns a stake worth more than $2.5 billion at the
high end of the range being considered. While Hoffman’s stake
isn’t disclosed in the prospectus, the website Who Owns Facebook
estimates he owns 0.5 percent, or about $500 million based on a
valuation of $100 billion. Hoffman is also the founder and
biggest shareholder of LinkedIn Corp., with stock valued at
about $1.8 billion following its IPO.
Thiel’s Founders Fund, which includes other PayPal alumni,
is poised to reap additional gains from the IPO of SpaceX, the
private rocket-launch business founded by Musk. In an interview
this month, Musk said “there’s a good chance that SpaceX goes
public next year.”
Musk, whose main job is Tesla Motors Inc.’s CEO, also is
chairman of solar installer SolarCity Corp. That company is
preparing to file for an IPO as early as March, a person
familiar with the matter said this month.

Early Days

Musk and Thiel were rivals in the early online payment days
– before their companies merged, forming what became PayPal.
Before PayPal’s IPO in 2002, Musk was the biggest individual
shareholder, with 11.7 percent ownership. Thiel owned 4.6
percent, and Levchin controlled 2.9 percent.
PayPal’s former operating chief, David Sacks, is now
founder and CEO of Yammer Inc., a provider of social-networking
software to businesses. Its service is used by more than 100,000
companies. While Sacks isn’t talking about an IPO filing, his
startup is benefitting from the popularity of Facebook and
growth of social media.
“Facebook is the inspiration for a lot of what we’ve done
in a parallel universe,” Sacks said in an interview with
“Bg West.” “They’re essentially connecting the whole
world. The scale is staggering.”