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October 28, 2007
Age of Riches
After Succeeding, Young Tycoons Try, Try Again
By GARY RIVLIN
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SAN FRANCISCO — Max Levchin is not easily distracted from his work.
A few years ago, Mr. Levchin, one of the young princes of Silicon Valley, bought his first home, a 12-room Edwardian high atop a hill here, for $3.4 million. But Mr. Levchin, who made a fortune at age 27 selling PayPal, the online payment service he helped start in 1998, never moved in. He sold it two years later without having slept there for even one night.
Since then, Mr. Levchin has moved into his second home, a more expensive one found for him by Nellie Minkova, his girlfriend of eight years who has become his fiancée. But so consumed is he by work on his second company, an Internet start-up focused on sharing photos and videos, that the cartons that contain what Mr. Levchin described as “85 percent of my worldly possessions” are still stacked in his living room, five months after moving day.
Mr. Levchin, who is now 32, is typical of a new generation of junior titans in Silicon Valley who might be called the prematurely rich — techies worth tens of millions of dollars, sometimes more, at an age when many others are just starting to figure out what to do with their lives.
The Internet, a low-overhead medium with a global reach, has greatly accelerated the wealth creation phenomenon, producing a larger breed of multimillionaires even younger and richer than in the past.
They are happy to be wealthy, of course, but many of these baby-faced technology tycoons often seem indifferent to the buying power of their money, at least at this stage of their lives. Instead, nearly all of them have chosen to throw themselves back into a start-up, not so much because they want a spectacular new home or a personal jet — though many of them do — but because they are in a competition with themselves and one another.
“For most of us, doing it again means surpassing what we’ve done previously,” said Peter A. Thiel, Mr. Levchin’s partner at PayPal, who also has started a new business, a hedge fund called Clarium Capital. “And that can be a really high bar.”
Even among this jittery group of overachievers, Mr. Levchin stands out. In part that is because outdoing PayPal may be an all-but-impossible goal. Mr. Levchin acknowledges that he has already earned more money than he could ever spend. But he said he would not consider Slide.com, the photo and video sharing site he founded in 2005 that is still in its start-up phase, a success unless it is ultimately worth, in real dollars, “at least $1.54 billion”— the price eBay paid for PayPal.
“Otherwise,” he asked rhetorically, “what have I learned?”
During his PayPal days, Mr. Levchin was so committed to seeing the company succeed that he often sacked out at the office in a sleeping bag he kept under his desk. Considering that he described his apartment during some of this time as “scary,” that had a certain logic. Cardboard boxes served as his living room furniture; a discarded computer desk was his dining room table.
These days, despite the phenomenal success of PayPal, which gave him the bulk of a fortune worth around $100 million, Mr. Levchin continues to work an average of 15 to 18 hours a day.
“We occasionally go out to eat, he sleeps a few hours, he works out,” Ms. Minkova said. “But other than that, Max works.”
Ms. Minkova half-joked that she might appreciate her occasional evenings out with Mr. Levchin more, if only he were not on his BlackBerry, answering e-mail messages and checking his Web site.
One friend, Dennis Fong, who sold a company to MTV Networks last year for $102 million (and is already at work on a new start-up), talks about the “weird growling sound” that Mr. Levchin tends to make when someone even mentions the name of his chief rival, RockYou.
And so committed is Mr. Levchin to seeing Slide.com succeed that he keeps a blood-pressure monitor on his desk. “I don’t know what I would do if I couldn’t start companies,” he said. “I’d probably think about slitting my wrists.”
Wealthy at a Young Age
Maximillian Rafael Levchin was born and raised in Kiev, Ukraine, a Jew living under Soviet rule for 16 years. As the Soviet Union was crumbling, the family moved to the United States and settled in Chicago. But the worst year of his life, he said, was not when he was growing up but after eBay bought PayPal.
He thought he would spend the time after the sale “exploring my inner self.” Instead, he spent the better part of 12 months “feeling worthless and stupid” and baffled by what he might do with the remainder of his life. He felt too young to retire or downshift a gear or two — and too restless to become a philanthropist.
“I enjoy sitting on nice beaches and hanging out with my girlfriend and playing with my dog, but that’s three hours a day,” Mr. Levchin said. “What about the remaining 18 hours I’m awake?”
At first, free time was not much of a problem. Coming into a lot of money at a very young age, Mr. Levchin found himself forced to ponder things like irrevocable trusts and secondary beneficiaries. Several times a week, he would listen to the gentle hectoring of older, well-dressed men and women whom he playfully mimicked, employing a basso profondo, game-show announcer’s voice.
“Think of the kids you don’t have,” Mr. Levchin quoted them as saying. “Think of your unborn grandkids.”
As those obligations of his new wealth subsided, Mr. Levchin contemplated what he might do next. For a time, Mr. Levchin, a graduate of the University of Illinois at Urbana-Champaign, thought about returning to school and earning a doctorate. That is what his mother, a physicist, had always wanted him to do, and it seemed to suit his temperament.
But discussions with a friend who teaches computer science at Stanford convinced him that academia was not the life for him. “This friend said, ‘Don’t kid yourself, you’re going to start another company,’” Mr. Levchin said. “It was one of those things where as soon as he said it, I knew it was true.”
He thought, too, about becoming a venture capitalist or an angel investor, a well-paved path for generations of entrepreneurs before him. Sequoia Capital, one of Silicon Valley’s top venture firms, gave him a desk to use while he figured out his next step. The partners at Sequoia would regularly invite him to join pitch meetings, but that experience taught him that he was hardly suited to the more nurturing side of the profession.
“I took this perverse pleasure in seeing if I could make someone cry,” he said.
At Sequoia, Mr. Levchin met James Hong, another successful entrepreneur who today is one of his closest friends.
“We’d go out drinking, and Max’d talk about how miserable he was, and I’d talk about how miserable I was,” said Mr. Hong, who was 27 when he and a friend started HotOrNot, a Web site popular with the under-30 crowd.
Mr. Levchin added, “We were both pretty pathetic.”
While not nearly as rich as Mr. Levchin, Mr. Hong describes himself as well off enough so that work is optional. He was collecting more than $1 million a year from HotOrNot, a project he and his partner had created in seven days and which demanded little of his time.
“All of a sudden, you have the luxury — or the curse — of being able to ponder the meaning of life,” Mr. Hong said. “You ask yourself, ‘Why am I not happier given how lucky I’ve been?’”
Only later did Mr. Hong diagnose the real source of his angst: he was not doing much of anything. So like most of his peers, Mr. Hong decided to throw himself back into work, in his case refocusing on HotOrNot in the hopes of transforming the Web site into a larger business.
In Silicon Valley, said Robert I. Sutton, a professor of management science and engineering at Stanford and co-founder of the Stanford Technology Ventures Program, remaining relevant, if not also admired and respected, requires that an entrepreneur continue to speed along in the fast lane.
“In other parts of the country, things like a great estate are the symbols people most respect,” Mr. Sutton said. “But here, the greatest status symbol is a person’s ability,” he added, to “still bring out hot new companies” and show that you are “working on the hot new technologies.”
Some, of course, choose to step off the start-up merry-go-round. Pierre Omidyar, 40, the founder of eBay, remains chairman of that company, but he gave up the day-to-day operations in the late 1990s. Since that time, Mr. Omidyar, who has a net worth of $9 billion, has devoted most of his work energies to philanthropic causes and investments in projects in the United States and in the developing world.
Mr. Levchin concluded that his competitive drive was too strong for that kind of life. During his time off, he competed with Mr. Hong over who was the more frugal of the two and challenged him to push-up contests at the gym. “No matter how many I’d do,” Mr. Hong said, “he’d have to do that many plus two.”
So Mr. Levchin did what any young titan in his position might have done. He dipped into his deep reserves of cash to pay for a large loft space and hired a half dozen of the smartest computer programmers he knew.
“I knew I wanted to be a C.E.O.,” Mr. Levchin said. “I just didn’t know the C.E.O. of what.”
Readying for the ‘Next Race’
Mr. Levchin proved vigorous in his pursuit of the right start-up. There are those in Silicon Valley who still create new companies out of a desire to crack a challenging technical problem. But not Mr. Levchin, who, like many of the area’s most highly regarded software engineers nowadays, views himself as the creator of potentially lucrative businesses more than simply the architect of a nifty new technology.
“It’s easier to start the next company than it was in the past,” said Marc Andreessen, who was a co-founder of Netscape Communications in 1994, when he was 22. It is also potentially more lucrative than it was even a dozen years ago, said Mr. Andreessen, who despite a net worth estimated to be in the hundreds of millions of dollars is now at work on his third start-up, a social networking company called Ning.
“For the first time in history, you have a global market of 1 billion-plus people, all connected over an interactive network,” Mr. Andreessen said. “The opportunities are bigger than ever before.”
A site for sharing photos and video was not necessarily Mr. Levchin’s favorite among the dozen or so ideas he pondered. But he chose Slide.com precisely because he thought it had the greatest potential to become a business that could surpass PayPal in size and reach.
In 2005, when he started Slide, the Internet already had plenty of popular photo-sharing sites, but Mr. Levchin saw a new way to cash in on the desire of so many to express themselves in cyberspace: a service that gives people an easy way to dress up their blogs and personal pages with photo slide shows, videos and the like.
Facebook users, for instance, use Slide-produced playthings like its multimedia “FunWall” or the “SuperPoke” widgets that let them hug or punch a fellow member (figuratively speaking) or even throw a virtual sheep at someone (as apparently 20,000 people an hour choose to do, according to Slide).
More than 130 million people viewed at least one Slide multimedia presentation in June, according to the Internet traffic monitor ComScore.
“I’d run any company; it’s completely irrelevant to me,” Mr. Levchin said. “It’s really about this drive to win.”
Yet what Mr. Levchin calls “my particular brand of obsession” comes with a cost. He wishes he gave more to charity, but he can never seem to find the time. “It’s pathetic how much I give compared to other people I know worth considerably less,” he said. And his desire to earn even more means he pays little attention to the wealth he already has in the bank.
“This ‘next race’ attitude really shapes your brain,” Mr. Levchin said. “It’s ‘Ready, set, go,’ and nothing else really matters.”
The three-story, five-bedroom house he shares with Ms. Minkova cost him $5.3 million, but it seems to be his only big post-PayPal indulgence.
Indeed, Mr. Levchin has not splurged on the pricey luxuries that some other Silicon Valley luminaries enjoy. Those twin kings of the Valley’s under-35 set — Google’s co-founders, Sergey Brin and Larry Page, with a combined net worth of more than $40 billion — have splurged on a fully loaded customized Boeing 767-200. But for Mr. Levchin, there is no six-figure car parked in his driveway, and dinners out tend to be at chain eateries rather than at high-end restaurants.
“Spending money is a fine pursuit, and anyone’s welcome to do it,” said Scott Banister, a close friend of Mr. Levchin’s since college who recently sold an antispam company to Cisco for $830 million and is now working on a social networking site, Zivity, which he describes as a “cross between Playboy and American Idol.”
“But then obviously at that point, you’re spending,” he said, “not producing.”
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