The three South Africans and their friend who ran the PayPal Mafia

Mafias dominate Silicon Valley today, with a Facebook Mafia, OpenAI Mafia, and Amazon Web Services (AWS) Mafia emerging in the past decade.

While these mafias have rapidly grown in prominence, they all owe their existence to the godfather of tech mafias — the PayPal Mafia.

The PayPal Mafia was the training ground for many of Silicon Valley’s most successful entrepreneurs and venture capitalists, with its members creating companies such as Tesla, SpaceX, LinkedIn, YouTube, and Yelp.

The mafia has regained its notoriety in recent years, with many of its members becoming heavily involved in developing generative artificial intelligence and US politics.

What is not widely known about the PayPal Mafia is that three South Africans played a major role in its formation and growth under the so-called ‘Don’ of the mafia, Peter Thiel.

The three South Africans — Elon Musk, Roelof Botha, and David Sacks — share a common background, all coming from the tip of Africa.

Thiel also spent some time in the country before becoming a renowned tech investor. Most of his few years in Africa were spent in modern-day Namibia at a school in Swakopmund.

These three would effectively run the company, rising to become C-suite executives. Musk had a brief stint as CEO, while Botha and Sacks occupied their positions as CFO and COO well after Musk was booted from Paypal.

PayPal was founded by Thiel, Max Levchin, and Luke Nosek in December 1998 as Fieldlink and later renamed Confinity. The company originally offered just a money-transfer service. 

Musk became involved in 1999 when his company, X.com, merged with Confinity. The South African-born entrepreneur was extremely bullish about the future of digital wallets and payments. 

However, the wheels soon began to fall off at the company. Musk wanted to keep the name X.com while a majority of the employees preferred PayPal. 

Musk’s management style became increasingly intense, resulting in a small group of employees persuading the board to oust him as CEO and bring back Peter Thiel. 

Botha was brought along for the ride by Musk. He joined X.com before it merged with Confinity and soon rose to become its CFO. He was not a fan of Musk’s management style. 

“I think it would have killed the company if Elon had stayed on as CEO for six more months,” Botha said. “The mistakes Elon was making at the time were amplifying the risk of the business.”

X.com was renamed PayPal in June 2001 and was listed on the Nasdaq in 2002. Shortly after, eBay bought PayPal for $1.5 billion. 

The original PayPal employees had difficulty adjusting to eBay’s more traditional corporate culture, and within four years, all but 12 of the first 50 employees had left.

As these former PayPal employees left the company and became successful tech entrepreneurs and investors in their own right, the PayPal Mafia moniker emerged. 

In 2007, Fortune published a photo of thirteen former PayPal employees in gangster attire, creating the ‘PayPal Mafia’. Botha, Sacks, and Thiel were among them, but Musk was absent. 

These ex-employees created companies such as LinkedIn, YouTube, Yammer, Yelp, Tesla, and SpaceX. Many were also early investors in Facebook, Instagram, Square, and Reddit. 

These three South Africans were instrumental in PayPal’s rise and Silicon Valley’s emergence as the world’s tech hub. Here’s where they came from and where they are now.

Elon Musk

Elon Musk is probably the most famous member of the PayPal mafia. He has become a lightning rod for political controversy alongside his incredible entrepreneurial feats. 

He is best-known for revolutionising electric cars with Tesla and his ambitious mission to get humans to Mars with SpaceX. 

Born in Pretoria on 28 June 1971, Musk has garnered a reputation for his intense management style – which resulted in his ouster from PayPal. 

Musk went to Bryanston High School before moving to Pretoria Boys towards the end of his school career. He briefly attended the University of Pretoria before moving to Canada, gaining citizenship through his Candian-born mother, Maye. 

Musk later transferred to the University of Pennsylvania and received bachelor’s degrees in economics and physics. 

He moved to California in 1995 to attend Stanford University but dropped out after two days and, with his brother Kimbal, co-founded the online city guide software company Zip2. 

The startup was acquired by Compaq for $307 million in 1999. That same year Musk co-founded X.com, a direct bank. X.com merged with Confinity in 2000 to form PayPal. 

When eBay bought PayPal for $1.5 billion, Musk used $100 million of the money he made from the sale to found SpaceX in 2002. 

He would soon become an early investor in Tesla in 2004, becoming chairman. He later became the product architect and, in 2008, the CEO.

These two companies make up the bulk of Musk’s net worth and are behind him becoming the world’s richest man, as at the time of writing, worth $269.8 billion. 

Roelof Botha

Roelof Botha is the grandson of the late minister of foreign affairs, Roelof Frederik “Pik” Botha.

His father, a renowned economist, ensured Botha flourished academically at Hoërskool Jan van Riebeeck but also that he never spoke English at home. 

Set on attending an English university, Botha attended the University of Cape Town and graduated with a BSC in Actuarial Science, Economics, and Statistics. 

The young Botha landed a job as a business analyst at consulting firm McKinsey & Co. in Johannesburg and worked there for a few years. 

At the time, Botha said he was reading about what was happening in Silicon Valley and was set on challenging himself against the world’s best and riding the wave of the internet. 

After two years at McKinsey, Botha enrolled at Stanford University for an MBA and finished top of his class. Job offers flooded in after that.

One immediately stood out. After rejecting two offers, Botha was introduced to Elon Musk by a mutual friend, after which the X.com founder convinced him to join the fledgling startup. 

Botha rose to become PayPal’s CFO, and once he left, he said that Musk had not provided the board with a full picture of the company’s problems. 

At 29, during the Dot-com Bubble, Botha oversaw the financial operations of a billion-dollar company and led it through its IPO in February 2000.

Botha received an offer to stay on at PayPal, but Sequoia’s Michael Mortiz offered him a chance to enter the venture capital world. 

He has been immensely successful as an early-stage venture capitalist, growing Sequoia’s assets under management and his own wealth. 

He led the firm’s early investments in YouTube, Instagram, and Square – netting the company hundreds of millions of dollars. 

Botha now leads Sequoia Capital and sits on the boards of MongoDB, Evernote, Bird, Ethos, Natera, Square, Unity, and Xoom.

David Sacks

David Sacks spent considerably less time growing up in South Africa than Musk or Botha, moving from Cape Town to Tennessee when he was five. 

Unlike Musk and Botha, Sacks also never had a great desire to become involved in the tech world. He simply did not want to work in a profession like his father, an endocrinologist. 

Sacks attended Memphis University School in Memphis, Tennessee. He earned his Bachelor of Arts in economics from Stanford University in 1994 and a Juris Doctor from the University of Chicago Law School in 1998.

While Musk headhunted Botha, Sacks went to work with Thiel at Confinity in 1999 and became the company’s first product leader and then its COO.

Sacks built and ran many of the company’s key teams, including product management and design, sales and marketing, business development, international, customer service, fraud operations, and HR. 

He pivoted the product from beaming money on Palm Pilots to emailing money on the web and introduced the business model that would make PayPal a billion-dollar business. 

Like Musk, Sacks used the money from the listing of PayPal on the Nasdaq, and its sale to eBay to launch his own companies. 

In 2008, he founded enterprise collaboration company Yammer, which was one of the first software startups to apply consumer growth tactics to enterprise software. 

Yammer’s viral approach made it one of the fastest-growing software startups in history, exceeding eight million enterprise users in just four years. As Founder/CEO of Yammer, Sacks grew the company to roughly $60 million in sales and 500 employees. 

In July 2012, Microsoft acquired Yammer for $1.2 billion. Using this money, he co-founded Craft Ventures, a venture capitalist firm, in 2017. 

As a partner at Craft, Sacks has invested in over 20 unicorns, including Affirm, AirBnB, ClickUp, Eventbrite, Facebook, Houzz, Lyft, OpenDoor, Palantir, Postmates, Reddit, Slack, SpaceX, Twitter, Uber, and Wish.

This article was first published by Daily Investor and is reproduced with permission.