David Sacks, Founding COO of Paypal, on product-market fit - Deepstash
Product first companies discover the market

A tech startup usually starts with an idea. Rarely do they start with a market.

Paypal started like this, with an idea of emailing money. But, as David Sacks (the COO and Product leader at the time) recalls, nobody was using it. So they discovered by accident that Paypal was used on Ebay. That market insight became the go to market strategy for Paypal.

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Distribution tricks

Advertising is not scalable for a startup. So they have to come up with distribution tricks. This is a key innovation that startups need to come up with. 

Paypal had a few tricks:

  • email virality. People got an email telling them they receive money and they had to sign-up to receive them. Also used by early LinkedIN.
  • ebay integration: ebay sellers could sign up with their ebay credentials and a Paypal link would be added automatically. Also used by Youtube. 
  • signup referral bonuses: if you recommend someone else they would get $10

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