(2022-08-23) Chin Paypal The Beamers Didnt Come

Cedric Chin case PayPal - The Beamers Didn't Come. The PayPal we are familiar with evolved out of a 1998 technology startup named Fieldlink. Its co-founders, Max Levchin, Peter Thiel, and Luke Nosek, were initially focused on providing security services for enterprise customers with handheld devices.

Their previous experience selling mobile security to enterprise customers revealed to them that most people didn’t even think of it as a problem. Fieldlink was simply too early.

Fieldlink decided to target consumers instead. Thiel and Levchin closed a $500,000 funding round in February 1999 and changed the company name to Confinity

their pivot to launch mobile wallets for handheld devices.

But this pivot had a similar problem. People were reluctant to swap their physical wallet for a virtual one; worse, it wasn’t seen as exciting or as futuristic for customers. Confinity then brainstormed alternative use cases and came up with the idea of “beaming money” using the infrared ports found on the 1998 Palm IIIs

The idea sounds stupid today, but the early Confinity team really believed that it had a shot

Levchin went to the 1999 International Financial Cryptography Association conference

It turned out that the team was pitching its concepts amid a string of spectacular digital currency failures. DigiCash, a ten year old attempt at a similar idea, had just declared bankruptcy a year before

Nokia Ventures invested US$4.5 million, and did it at Confinity’s 1999 PayPal launch event.

With a working prototype at hand, Confinity believed that if they built it, the beamers would come. Others at the company weren’t so sure. Board member Reid Hoffman questioned the practicality of beaming from the very beginning

we could walk into every single restaurant and go to each table and ask how many people have PalmPilots.” He guessed the answer was between zero and one per restaurant

Hoffman then raised another problem. What if one of these PayPal users forgot their PalmPilot and still needed to beam money? What then? In response, Levchin proposed a backup email service. Users who forgot their PalmPilot could go home, open up PayPal’s website, and send money via email. No infrared ports or physical proximity needed. This was an eureka moment, but few recognized it at the time.

Over the next few weeks, however, Levchin found himself increasingly using the email service to test out PayPal’s transaction functionality, since he found it more convenient than setting up the hardware for the PalmPilot

Thiel eventually brokered a compromise: both products would be built side by side. By 2000 though, it was clear that the PayPal email service was the superior product. Email was everywhere, and PalmPilot wasn’t

eBay paid a cool US$1.5 billion to acquire PayPal in 2002.