The Slow Road to Entrepreneurship: Learnings From Early PayPal

We all know the stories: Zuckerberg, Jobs, and Gates dropped out of school and founded three of the companies that define our world. They went from college students to entrepreneurs, no transition required. But that’s the exception; to generalize Dave McClure’s instant classic, those of us in Silicon Valley’s 99.9% have to content ourselves with being relatively late bloomers.

That’s reflective of a larger narrative that dominates much of the talk around entrepreneurship: the narrative implies that one is either 0% entrepreneur or 100% entrepreneur. Such a binary classification implies that entrepreneurs have to go from 0 to 100 in one step. While there’s some truth in that — you won’t completely understand the thrills, stresses, and demands of starting a company unless you do it yourself — you can certainly prepare yourself for future entrepreneurship by being a part of early stage companies with people who can help you learn quickly.

My own story is certainly reflective of that: I wasn’t ready for entrepreneurship at age 21 or 22. By my late 20′s, I was aching and ready to start and grow a company. Here’s how that change happened.

My first substantial job experience after college (following eight months as an engineer at a failed startup) was at early-ish PayPal. I was part of the company’s growth from small in 2000 (a very unprofitable hundred person startup) to huge in 2004 (massive subsidiary of massive Ebay).

As a new employee, I knew nothing about fraud detection and received minimal guidance. Somewhat lost, I added very little value to the company my first few months. Three months after joining PayPal, Sports Illustrated wrote an article about my side project, Team Rankings. I sensed some irritation from my boss Max: I was doing only so-so work at PayPal, but was getting significant publicity for a side project. That irritation seemed unfair to me at the time; having now been a founder myself, I can completely relate. Founders want people on their team executing at the highest level; seeing someone perform better on a side project than in the office doesn’t send that signal.

Fortunately, I soon found my way, and (with some help) figured out how to turn massive amounts of data into statistical models that could accurately predict fraud. I felt like I was living on the edge because I eschewed the “easy” off the shelf enterprise tools others were using. Some 23-year-olds rebel by using mind-altering drugs or traveling the world; for me rebellion was writing software from scratch to build statistical models. And this defined me: any job other than predictive modeling struck me as superficial, scientifically empty, and not worth doing.

My job at PayPal focused and insulated me. In 3.5 years at the company, I did one thing: build technology to predict fraud. Most of what was going on at the company — operations, usage, product, competition, finance — were of no concern whatsoever. I became very skilled in a few very specific areas, but knew very little about the goings on across PayPal.

If I had a publicist, I’m sure he or she would tell me to broadcast that I magically learned how to build a business while I was at PayPal: surely that magic would cement my place as part of an all-knowing PayPal Mafia. Alas, I don’t have a publicist, so the truth will have to do: PayPal taught me very little about how to build a successful startup.

But the PayPal experience was formative in two key ways. First, it showed me that talented, driven, resourceful people with virtually no knowledge of an industry could become skilled in areas they’d never known about before (for me: fraud detection) and collectively build a large Internet business and change the world. Second, my colleagues at PayPal set a bar for the caliber of thought and effort that I now expect from those I work with.

After several great and educational years, by early 2004 my job at PayPal had become routine. Fifteen months after Ebay acquiring us, the company’s combative, execution-focused culture had been swallowed by Ebay’s relentless drive to maximize employee time spent in PowerPoint meetings. I didn’t have deep insight into the business of PayPal and Ebay, but I knew I didn’t want to play the big company game. Yet for financial reasons, I was motivated to stay around to vest my remaining stock options.

Researching my choices, I discovered that Ebay had a policy which allowed employees to work just 24 hours a week, while continuing to fully vest their stock. This held a lot of appeal — especially since I was interested in spending some time helping out some friends who were working on a new site called LinkedIn.

Ebay’s lenient vesting policy was likely designed for new mothers or those with health issues — not 26-year-old males interested in moonlighting at a startup. That didn’t dissuade me: I soon shifted my schedule to one where I worked 3 days a week at PayPal and spent the rest of my time at LinkedIn. And the LinkedIn days were a lot of fun, as I got to work with a small team, focus on a completely different set of data problems, and understand how a social network could rapidly grow.

At this point, in the first half of 2004, my boss Nathan at PayPal was trying (struggling) to find cool stuff to work on, so we spent some time with other groups at Ebay looking for interesting data problems to solve. But I soon realized that once I started to look down upon my employer, it would be difficult for me to do top-quality work. I was still building good fraud models, but I was no longer psyched about my job at PayPal, and the caliber of my work certainly suffered. I admire those who can be completely professional and work at full intensity for anyone at any time, but I’m not like that. When I’m excited about a project and a company, I’m hard-working, clever, and efficient. When I’m coasting, I’m none of those things.

Trying to foster more commitment, Nathan came to me in July 2004 and told me that I had to choose between working full-time at PayPal and leaving. I’m guessing he thought this would push me to increase my commitment, but it had the opposite effect: I was bored, disgruntled and antsy, and I was going to leave. I left PayPal in August and darted off to France for a month of cycling.

At this point, I had aspirations of starting a company some day. I’d had some entrepreneurial experience with Team Rankings (more on that later), and had built up some skills at PayPal. At PayPal, I’d worked on some other side projects that could have turned into their own companies (none amounted to much). But I didn’t have in mind a specific company that needed to be started, nor was I compelled to start a company just to start something. And LinkedIn seemed like an attractive place to be: a strong 15-20 person team, an innovative and useful product, a really interesting data set. So I decided I’d join LinkedIn full-time.

I’d spend two and a half years at LinkedIn. I was the first analytics scientist and would lead what’s now called the Data Science team. Unlike my insulated time at PayPal, my years at LinkedIn would get me very close to the business and the product, piquing my interest in a much wider array of topics. Ultimately, that experience would nudge me to jump off the entrepreneurship cliff and start my own company. In my next post (follow me on Twitter), I’ll tell the story of those two and a half years and of the key experiences that led me to start something myself.

Mike Greenfield founded Circle of Moms and Team Rankings, led LinkedIn's analytics team from 2004-2007, and built much of PayPal's early fraud detection technology. Ping him at [first_name] at