Fortune Magazine in 2007 put out a picture of a group of men sitting in a bar, all looking very ‘mafia-like’. These men were nowhere associated with the mafia, on the contrary, it was a hyper-intelligent and superconnected pack of serial entrepreneurs, the PayPal Mafia.

“Startup mafia is an alumni network that’s generated at least three or more truly iconic companies worth billions of dollars.” – Keith Rabios (ex-PayPal)

PayPal Mafia

The PayPal team members went on to found some of the most important startups — and make some of the most strategic investments — of all time. Without PayPal, we might not have YouTube, Tesla, SpaceX. LinkedIn, Palantir just to name a few.

The biggest success factor in the Silicon Valley ecosystem is not VC funding, policies, or access to talent, but it is the ‘Mafia Network.’ This network provides support, investment, gives mentorship, helps each other and also many upcoming startups.

Here is the backstory. The year is 1998. Peter Thiel and Max Levchin met at Stanford after Thiel gave a guest lecture in his alma mater and they began to work together on the concept of a digital wallet. They named it Confinity. Eventually, one employee developed a way to send money transfers via email and that service became PayPal in 1999.

PayPal grew fast and was eventually acquired by eBay for $1.5B. Confinity was then merged with Elon Musk’s X.com. After proving its success as a product, the company adopted the name PayPal in 2001. The Paypal story is unique especially because of the people behind it. All the early employees were recruited through a friendship network and not by a headhunter. Keith Rabois, David O. Sacks, Reid Hoffman, and Ken Howery all attended Stanford and were subsequently recruited by Thiel to work for PayPal. Levchin recruited developers and former classmates from the University of Illinois at Urbana-Champaign as well.

While the acquisition worked out well financially for PayPal employees, it didn’t as well culturally. Nearly half of PayPal’s 200-something employees had left and gone elsewhere.

From here things get surreal. After PayPal, Peter Thiel founded the hedge fund Clarium Capital, where he was joined by PayPal veterans Andrew McCormack and Ken Howery.

Thiel also invested in a young startup called ‘The Facebook’ at that time. Thiel’s friend and former PayPal coworker Reid Hoffman also invested in Facebook. After his exit, Hoffman and a few others started LinkedIn, which quickly accepted investment money from Keith Rabois and Peter Thiel.

Even Elon Musk, who took his earnings from the sale and founded SpaceX and invested in Tesla, still relied on help from the PayPal Mafia for ideas and funding. When Musk’s attempt at building a more cost-efficient space rocket failed three straight times and seriously drained his funding for SpaceX, it was a former colleague from PayPal who invested enough to keep him experimenting.

But the PayPal mafia is not a one-off thing. Closely knit core teams of successful startups often proliferate as founders of more successful companies. It’s like a recycling effect and the same recycling of entrepreneurs is true for the Indian startup ecosystem as well. Let’s deep dive to the Indian startup mafia world.


The discussion about startup mafias is incomplete without talking about India’s first unicorn – InMobi. The global mobile advertising leader has taken one step ahead to promote the entrepreneurial culture within the organization.

Started by HBS alumnus Naveen Tewari along with Mohit Saxena, Amit Gupta and Abhay Singhal, InMobi’s focus has always been on innovation. They initiated policies like paid sabbaticals to employees to try their ideas and hiring the “Boomerang employees” – employees who left InMobi to start their own venture. Not only did this help them in achieving success in the market, but it has also shown Indian companies a guiding framework to foster the startup and innovation ecosystem. More than 50 startups ranging from tech, health and crowdsourcing have been founded by the InMobi alumni so far.


Though InMobi started the journey of recycling entrepreneurs, the biggest push was given by India’s most successful startup – Flipkart. So far, Flipkart has spawned 200+ startups including the biggies like PhonePe, Udaan and CureFit.

How come so many Flipsters went on to start their own companies? While part of this could be attributed to Flipkart’s open and entrepreneurial culture, if we look closely, the majority of these startups were founded between 2014-16. Flipkart raised $1 Bn of investments valuing it at a whopping $7 Bn in 2014. This essentially resulted in a surge in investing activities in the Indian startup ecosystem. The event also led to many Flipsters contributing to the ecosystem in various ways. Many of them founded their own companies, while others turned into investors. Flipkart invested in 48 of these startups and acquired 11 of them.


Moving on the poster boy of Indian SaaS startups – Zoho, founded in 1996 by Sridhar Vembu. Notably, Zoho has been profitable since inception and is one of the few bootstrapped unicorns.

Till date, 41 startups have been founded by Zoho alumni. The biggest in the long list is Freshdesk, which became a unicorn in 2018. Zoho’s mantra of churning out successful startups one after another is deeply rooted in Zoho’s culture. The SaaS giant promotes intrapreneurship, provides extreme ownership and serves as a finishing school for entrepreneurs.

Apart from Flipkart, Inmobi and Zoho, there are few silent members of this celebrated club as well. One such name is Gurugram-based online travel platform ixigo, which claims that one out of every 10 employees has gone to become an entrepreneur. Another story is from India’s first digital wallet company, Mobikwik. A bunch of MobiKwik’s former employees have gone on to set up their own ventures across health care technology, meat delivery, dockless bicycles, financial consulting, and public relations.

This is an ever-evolving list. Indian ecosystem is vibrant and we will see more mafias in the future. Now, let’s understand the dynamics of the startup mafias.

Why are Mafias successful all over the world?

Well, one might ask how a pool of folks, with their roots to the same company, can be responsible for a disproportionately large number of successful startups?

If you put on your VC hat, what would be the most important factor if you are betting on a new idea. Would it be the idea, or the product or the metrics? The answer is the founding team. VCs feel much more comfortable investing in serial entrepreneurs. This is how Kunal Shah raised $30 Mn in funds from Sequoia Capital and Ribbit Capital before even the launch of CRED.

This is one of the many reasons, why startup mafias are successful all over the world, the other is the culture.

“We didn’t assemble a mafia by sorting through resumes and simply hiring the most talented people…They had to be talented, but even more than that they had to be excited about working specifically with us.” – Zero to One by Peter Thiel (ex-PayPal)

Well, It’s not just the big universities or legacy schools that can take you places. The network and recognition that comes with the Flipster or ex-PayPal tag, opens a plethora of opportunities.

The startup mafias support each other both formally and informally. For instance, Zoho mafia companies work with each other. Freshworks uses Chargebee for subscription management, Facilio uses Freshchat for website conversation and Hippo Video uses Freshdesk for customer support. This has gone beyond just the network, as startup mafias have launched their own funds to invest in their ex-employees to keep things in the family and taking the Cosa Nostra philosophy quite literally.

The rise of Mafias is a good proxy to measure the maturity of the ecosystem. The ecosystem grows due to the feedback loop generated by successful entrepreneurs. This attracts funding and VCs, talent, entrepreneurs, which is again reinvested into the system.

On an ending note, as the Indian startup ecosystem matures, we’ll see many more mafias and the legacy that the modern-day dons will leave behind!

Over the next 20 years, I will be very proud if there are 1,000 Zoman babies (1,000 startups by ex-zomans). I think we must already be 5-10% there. – Deepinder Goyal (Founder & CEO Zomato)

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