- Dan Chan joined PayPal in fall 1999 before Confinity and X.com merged in March 2000.
- He vested 13 months of stock options before leaving, which he sold in February 2002.
- If he’d waited, he would’ve made about $5 million.
- See more stories on Insider’s business page.
I joined PayPal in fall 1999 before Confinity and X.com merged in 2000 and Elon Musk came into the picture. I technically joined Confinity, and Confinity was doing business as PayPal.
I’d just graduated from the University of California, Riverside, with a degree in business administration with an emphasis in finance. During the summers in college, I worked at three camps as a lifeguard in California. My dream job was to become a full-time lifeguard, but my mom didn’t approve. She didn’t think I’d be able to raise a family on that salary.
PayPal was one of the first dot-com opportunities I saw.
I remember seeing the opportunity in a print newspaper. I interviewed in downtown Palo Alto at 165 University Ave.
Things were moving so fast – I worked there for one week, and then we moved to a large office off Embarcadero Road.
I made $32,000 a year plus stock options when I started as a customer-service rep. It was a very good customer-service salary, and the promise of stock options was the big selling point.
The two brothers who brought me in, Damon and Jason Billian, were super cool and friendly. They even got me in early – I told them I had to think about it, and they said I needed to sign the contract in a day or two, as the options would be repriced.
If I’d waited even one more week, the options would have been priced differently with the additional funding we were about to secure.
I was told by Damon Billian if I joined immediately, I’d get a more significant percentage of the company.
I’d heard stories of early employees and secretaries becoming millionaires when Microsoft had its initial public offering. Joining PayPal was going to be epic, and I was a part of it.
I was in customer service for about three to four months. Most of our customer service was about to be offshored to India in a new call center, so I transferred to the finance department.
At the time, to verify ownership of the bank account that customers connected to their PayPal account, we would send customers 2 small amounts of money.
Both were to total less than a dollar. Customers would then enter that amount on the website – when the numbers matched the deposited amounts, the bank account would be connected to the customer’s PayPal account.
A few customers sometimes would assume, incorrectly, that they needed to pay back the trivial deposit amounts we used to verify the ownership of their bank accounts. They would mail a check or even coins in the mail. One customer taped coins to a letter thanking us for making their life easier.
As a financial institution, we were legally required to deposit those funds into their accounts. My job was to create a daily spreadsheet of everything that came in that day and manually credit their PayPal accounts. Usually, after lunch, I’d drive to Silicon Valley Bank to make a bank deposit.
While we were making the lives of many people more manageable, the job wasn’t as exciting as I’d hoped it would be.
Shortly after I joined the finance team, I itched to leave once the company started laying folks off and outsourcing jobs to cheaper locations like Omaha, Nebraska, and then India and even told my mom I was going to quit. She insisted I stay for job stability, and as a “good boy,” I followed her instructions.
What made it easier to stay in this job I hated was the unlimited free food – vending machines that dispensed an endless supply of sodas and snacks. To top it off, we had breakfast supplied every morning and a catered lunch every day. If I stayed late enough, often there was dinner.
We all drank the Kool-Aid.
It was the typical dot-com era, with free food and arcadelike offices. At one company all-hands meeting, someone said if we took 1% of all taxes paid to the US government and had them paid through PayPal, that would amount to hundreds of millions of dollars in revenue.
To further our initiation into the company, we were given shirts with some tagline that said, “New World Currency.” (Editor’s note: David Sacks, who was PayPal’s chief operating officer from 1999 to 2002, mentions the T-shirts here, saying that “New World Currency” was the company’s “original vision” and “mission statement.”)
Damon Billian told me, “The funny thing is that some people thought the ‘New World Currency’ shirt was the sign of the devil.”
When the movie “X-Men” came out – the version that was released in 2000 – they rented out an entire theater in Mountain View, California, on opening week and gave us “X-Men” T-shirts.
I knew coworkers were taking things not just for work but also for their kids’ lunch. Some days the vending machine would be empty shortly after it was filled, I’m guessing in two days.
At the same time, I recall being told that we were losing $60,000 a month – but it could have been just in that meeting, since according to Eric Jackson’s book “PayPal Wars: Battles With eBay, the Media, the Mafia, and the Rest of Planet Earth,” we were losing $150,000 every day just from ordinary business operations. So we had to raise more money or go out of business.
Some fraudsters would sell items on eBay, collect the money, and not deliver the product. I think that was one of the reasons that eBay acquired PayPal. There were Russian fraudsters and mobsters taking advantage of the system. All this is documented in “PayPal Wars,” where Jackson says: “When the Russian and Nigerian mafias rung up online charges, they ultimately plundered PayPal, not the cardholder.”
In theory, the synergies of both companies – since the deal was also likely to help eBay’s bottom line – would allow us to coordinate with eBay so we’d be able to tackle the fraud problem. We were briefed on the number regularly, and with our burn rate as it was, I couldn’t help but think I was on the Titanic.
When I finally left the company in 2000, I had vested 13 months of stock options.
My stock was worth $189,120 the day eBay had its IPO. I should have sold a lot later as the stock continued to rise, but when PayPal made its public debut in February 2002, and my lockup period (a period of time when early investors can’t sell their shares) expired, I made the mistake of dumping all my stocks for safer, more conservative stocks.
I bought many stocks to “diversify my portfolio,” including Honda, Disney, Airbnb, and later Google, as I bought at least one share for every time they hired me in my current role as a company entertainer and magician. I still have some of those Disney shares.
I’ve since been advised that I would have been a multimillionaire multiple times over if I’d held on to my PayPal stock.
This is what Sal Giambanco – a former vice president of human resources who spent eight years at PayPal – recently told me: “You would have been a multimillionaire several times over for sure.” (Editor’s note: Giambanco told Insider that based on when Chan joined PayPal, Chan is considered among the “PayPal Mafia,” one of the first 241 PayPal employees in California at the time of the company’s acquisition by eBay on October 3, 2002. About 40 of the PayPal Mafia went on to found other companies. “It is true that at today’s valuation, his 1/4 vesting of his options would make him a millionaire,” Giambanco said.)
So I decided to do the calculations. My records showed that I’d vested 10,103 shares of X.com common stock at an exercise price of $0.074233 a share, which converted to 3,940 shares of eBay. (Editor’s note: Upon the merger of PayPal and eBay, shareholders received 0.39 shares of eBay for every share of PayPal.) And there were two “2-for-1” stock splits in 2003 and 2005.
As a result, I would have had 15,760 shares today.
The Motley Fool said it best: “In hindsight, how could any of us have missed that PayPal was the leader in an emerging trend? As the world went online, it was necessary – inevitable – that financial transactions would also go digital. And PayPal was a clear leader in 2002. But investing isn’t about hindsight. It’s about developing the foresight to cut through the fear, headlines, and conventional wisdom and identify the companies changing the world.”
It’s OK to make mistakes if you learn from them. I made the mistake of selling all my PayPal shares early on. I didn’t make the same mistake with Airbnb.
I had 200 shares of Airbnb granted to me at the IPO price. I sold 20% of them and am keeping the other 80%. My remaining Airbnb stock is valued at about $23,000.
PayPal did not immediately respond to a request for comment.
This article reflects the views of Dan Chan only and does not constitute financial advice. Please consult a professional financial advisor when making investment decisions.