PayPal Never Could Have Been Built Lean

I think that it is easy to be led astray by anecdote. I think that PayPal is such an outlier as to be irrelevant to almost all of us.<p>There's the fact that this all happened a decade ago. PayPal launched at a time when the internet was effectively undergoing a Western Expansion and many claims were being staked to build essential infrastructure. Very few ecompanies really understood the internet, there were very few incumbents in the online space and huge opportunities for first movers.<p>I can't imagine any VC today allowing a startup to spend in the way PayPal did. As we all know, back then it just wasn't realistically possible to be properly lean because building stuff was so much more expensive. I'm sure the idea of YCombinator would seem as nonsensical to the founders of the nineties as multimillion first rounds seem to us today.<p>The article alluded to the fact that payment transfer is exceptional in structure. I struggle to think of other startups that required such enormous network effects to become sustainable and had such extraordinary cashflow issues.<p>I think that there's a strong case that a PayPal-like business <i>could</i> be built lean today, but I'm not sure it's relevant - I don't think any of us are trying to build those businesses and I don't think any of us would succeed in doing so. Looking at the likes of Facebook, I think it's clear that the biggest, most network-dependent businesses really can be built out of dorm rooms these days.

It's unfortunate that Eric chose to label his philosophy "Lean" because it's become synonymous with "bootstrapped". Lean doesn't mean cheap it means efficient through validation of a business model before scaling.

<i>At PayPal we spent tens of millions in marketing through our referral program (get a friend to join we'll give you $5-10)</i><p>Assuming a good business case (which PayPal had: bootstrap network effect with pure money), could a web startup ever get funded to do something like that today?

Never mind the cost of the network effects, PayPal only stayed in business because it figured out effective fraud loss minimization, which its completion did not (billpoint etc). Preventing fraud is mostly orthogonal to the lean/cash intensive issue.

Why it couldn't have been build lean:<p>1. It needed a critical mass of both buyers and sellers<p>2. Customer service in financial industry is expensive<p>3. The 2 main competitors (Billpoint &#38; C2it) had bottomless pockets.<p>(4.) Web 1.0 technology was expensive.

It would be great if we could actually debate this topic instead of debating different interpretations of the title.<p>Lean doesn't mean cheap. It can mean more expensive. It simply means recognizing the cost of entering different markets and not spending too early, to optimize funding around finding a business model instead of the product development cycle.

In 2001, when the money was flowing, everyone's solution for any startup's problem was to throw money at it. Today, there many other outlets for growing an intelligent idea: blogs, press, alternative incentives programs. And minimal hardware/software costs to build such a product. While PayPal, in 2001, could maybe not have been built lean. It is very possible for the next PayPal-like startup to disrupt the market now on a micro-budget.