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- At age 23, Max Levchin moved to Palo Alto, where some of his former startup cofounders lived.
- One former cofounder recommended he talk to Peter Thiel, who was teaching a class at Stanford. Levchin wandered into Thiel’s class and they struck up a conversation.
- Thiel picked one of Levchin’s business ideas and decided, over breakfast the next day, that he wanted to invest. That business became PayPal.
The summer of 1998 in Palo Alto was really hot.
Max Levchin, a 23-year-old recent graduate from the University of Illinois had just moved to the west coast, lured by two friends who were his former cofounders. The three of them had previously started a company that failed within a year.
Levchin didn’t have an apartment or a job of his own, he told Business Insider’s US editor-in-chief Alyson Shontell on an episode of the podcast “Success! How I Did It.” So he crashed on his friend’s – Scott Banister’s – floor.
The heat was the only problem. There was no air conditioning. Levchin was quick with a solution.
“I had a habit of hanging out at Stanford on campus during summer school because it was all air-conditioned,” he told Shontell. “So I could sneak into a lecture, go in the back, pass out, and sleep a little.”
At that point, Levchin’s other friend in Palo Alto – Luke Nosek – had just started another company, which was funded by a man named Peter Thiel. Nosek told Levchin: “Hey, Peter’s giving a lecture at Stanford one of these days. You should go meet him because he’s a really cool hedge-fund-manager-type guy, who is investing in startups.”
Levchin told Shontell, “I saw [Thiel’s] name on the pinboard, wandered into a class that was taught by him, which turned out to be more like seminar with six people in the room. So it was a very small group of people. One: I couldn’t sleep because it would be obvious, but two, he was actually pretty interesting. So I stayed awake and chatted him up afterwards.”
That turned out to be a good move. Here’s Levchin:
“In the inimitable Peter Thiel fashion, we basically spend about 20 minutes talking after his lecture, and he said, ‘Well, what are you doing in Silicon Valley?’ I said, ‘I just got here two weeks ago. Probably gonna start a company.’ He said, ‘Oh, great. We should meet for breakfast.’
“We met the next day. He said, ‘All right, so what companies are you thinking of starting?’ I had two ideas that I was concurrently thinking about. I described No. 1., No. 2. He said, ‘No. 1 is better; you should do that.’ ‘OK.’ ‘I’d like to invest.’ It was less than 24 hours later. Peter was a committed investor in my new project.”
Levchin told Shontell that his original “deal” with Thiel was that, in addition to investing, he’d have to help Levchin learn how to raise money.
At some point, it became clear to Levchin that Thiel was better at big-picture thinking, and that Thiel should be CEO. Thiel agreed, and they incorporated the company that would become PayPal.