In December 1998, PayPal was started as Confinity founded by Max Levchin, Peter Thiel, Luke Nosek and Ken Howery, building security software for handheld devices. They developed the money transfer service PayPal. In March 2000, Confinity merged with, an online banking company founded by Elon Musk and renamed itself to the PayPal service they ended up focusing on.

PayPal went public with an IPO in Feb 2002, and then acquired by eBay just a few months after in July 2002. This created a great deal of wealth for its founders creating what has been dubbed the PayPal Mafia.

The PayPal Mafia has been compared to Shockley Labs whose engineers left Shockley and went on to start 65 new businesses including Gordon Moore and Robert Noyce leaving to start Fairchild and then Intel.