Former PayPal employees form YouTube

In February 2005, three former PayPal employees got together to form a new start-up – YouTube. Using their own money and their PayPal connections, designer Chad Hurley (who created PayPal’s logo) and technicians Steve Chen and Jawed Karim put together a small team to develop an online video platform – the early version of the powerhouse we know today.

In a talk he gave at Startup2Startup in June 2008, Hurley explained how their idea for YouTube was influenced by their time at PayPal:

“At PayPal we were working on a payment solution and we were able to learn things there along the way: observe how people were taking the solution with them, taking a payment button, and were putting this payment button on their own websites or blogs or auctions…but that button also took them back to the PayPal experience…

We tried to do the same thing when we were working on creating a video solution, trying to give them a video solution they could take with them. We initially thought more people would use them for auctions to describe the products but we quickly found out they weren’t…so we made it a more generalised video solution for people.”

In November 2005, with only their product and 6 months of stats to present, the team set out to find investors for YouTube. They made the rounds on Sand Hill Road, a road in Menlo Park, California known for its concentration of venture capital companies. Luckily they met with Sequoia Capital employee Roelof Botha, another PayPal alumnus, who was the CFO of PayPal when the YouTube team worked there. As they thought they could trust another person from PayPal, they accepted the Sequoia investment of $3.5 million and YouTube was off and running.

After only a year, Google acquired YouTube for $1.6 billion and Chad Hurley and Steve Chen became the Chief Executive Officer and Chief Technology Officer respectively. Karim, who took the position of adviser after co-founding the company, received a portion of the payout and has since launched his own venture fund.

I wrote to YouTube’s head office to find out more about the team’s early years at PayPal, but have yet to get a response. Because they met there and got start up help from a contact they made at PayPal, I think working there really shaped their future. As Hurley joked in an interview with Dave McClure of 500 Hats about being a “lowly designer” at PayPal, he said: “You have to have good ideas. And you have to make a product that’s easy for people to understand and use and relate to.”

LINKS:
See the full Chad Hurley Startup2Startup talk filmed by NewTeeVee
Interview with Chad Hurley by Dave McClure of 500 Hats and Startup2Startup