How Reid Hoffman Became a Silicon Valley Icon


Foundr Magazine publishes in-depth interviews with the world’s greatest entrepreneurs. Our articles highlight key takeaways from each month’s cover feature. We talked with Reid Hoffman about confounding LinkedIn and a founding board member of PayPal, two companies that have helped mold the world as we know it today and combined to sell for more than $27 billion. Read excerpts from that in-depth conversation below. To read more, subscribe to the magazine.

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Had Twitch been around when Reid Hoffman was 12, you may have been able to watch a future billionaire hone his business skills in real-time.

An avid gamer, Hoffman was obsessed with fantasy role-playing games, such as RuneQuest.

He loved the idea of creating a world, and, in some ways, participating in the earliest version of a metaverse where you had to learn how to collaborate with others, go on missions, and solve problems.

Then there was his passion for Avalon Hill board games that taught him the fundamentals of strategy. Fundamentals he still uses when talking to entrepreneurs today.

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“Frequently when I’m talking to entrepreneurs, the metaphor that I use to try to unpack a strategy is, what’s your theory of the game? Right? So what game are you playing? What’s your theory of the game? How do you win?” Hoffman says. “There’s obviously OKRs and other kinds of things. But that sort of thing I think came from my 12-year-old self, who was so obsessive about games.”

Unbeknown to Hoffman at the time, his obsession with gaming would give him a foundation of skills that would help him create behemoths of companies such as LinkedIn and PayPal and invest in countless others, including Airbnb and Coupons.com. The acclaimed author and investor is also the creator of the popular podcast Masters of Scale.

So how does a man prepare to build two companies that sold for more than $27 billion combined?

Easy.

By studying philosophy, of course.

To Be or Not to Be

Hoffman never intended to get into tech.

Initially, he thought he would be an academic, and after he had completed his studies at Stanford, where he graduated with a bachelor’s in Symbolic Systems, he crossed the pond and enrolled at Oxford.

As a Marshall Scholar, he received his master’s degree in Philosophy in 1993. However, during his studies at Oxford, he realized he would be spending most of his time writing papers for the academic community if he continued with a career in academia versus pursuing an ambition close to his heart, which was finding ways to help humanity evolve.

Witnessing what his classmates at Stanford had been doing with technology and how they were improving the world, he wanted to be a part of that.

Reid hoffman foundr magazine cover
Reid Hoffman on the cover of Foundr Magazine issue 107

With more of a clear focus on what he wanted to do with his life and what kind of companies he wanted to be involved with, Hoffman was on the job hunt when he returned to California. And naturally, he ended up at the perfect tech company that shared the same passions.

“When I came back from Oxford and I was looking around for a job, when I had that prospect at Apple, I jumped at it because of those old senses,” Hoffman says.

“Plus, part of what we do with technology is we try to make a better world for people.”

Although this was during the dark ages of Apple before Steve Jobs had returned, the company still had a commitment to its old senses and dedication to user interface design. Hoffman loved that, and while working on user experience for nearly two years, he gained buckets of knowledge from the very best.

After Apple, he spent some time with Fujitsu as their director of product management and development before moving on to his first entrepreneurial venture, SocialNet.

Founded in 1997, the social network hoped to help users find dating opportunities and connect with friends.

With this being his first startup, Hoffman was learning on the fly. From being an inexperienced manager to not having a clear plan on customer acquisition, the young company had too many hurdles to overcome, and after two and a half years, SocialNet ran its course.

But Hoffman wouldn’t remain idle very long.

The PayPal Mafia

While at SocialNet, Hoffman was also on the founding board of a cutting-edge technology company: PayPal.

PayPal, an electronic money transmission service, was co-founded by his longtime friend Peter Thiel, a relationship that started when they were sophomores at Stanford.

With SocialNet now dissolved, Hoffman joined the so-called “PayPal Mafia,” where he worked alongside future tech icons such as Elon Musk. However, at the time, Hoffman had no clue how influential his colleagues were. He had no idea they would be the future leaders of tech.

“No,” Hoffman says. “What I did know was it was a bunch of people with a very intense learning curve, who are running at creating the future really fast and kind of throwing the entire candle in the fire.”

One would think that with a company full of future leaders, PayPal ran without a hitch and faced very few challenges. It was actually the complete opposite. In fact, it was perhaps the most intense period of Hoffman’s life.

“I think a lot of it is we’re a bunch of young folks who didn’t understand management very well,” Hoffman says. “And [we] tended to make a number of unforced errors that you’d have to correct from fast. PayPal had a large number of near-death experiences.”

When thinking back to one of those near-death experiences, Hoffman recalls a conversation with Thiel in August of 2000 about how fast they were spending money. “I said, ‘Look, we’re spending money so fast that if we were … throwing wads of $100 bills over the roof of the building, we’d spend money less fast doing that than the way we are now,’” he says.

Without a real business model in place at the time and no revenue coming in, the company was running on fumes.

However, it’s intense experiences like this that people rarely see. Sure, everyone sees the great product and the acquisition, but they don’t see the stress behind the scenes that their team was shouldering.

“I do think it’s one of the things that people should understand about entrepreneurship,” Hoffman says. “It does involve those strains; it does involve that kind of tear in the stuff that you’re doing. But of course, that’s one of the reasons why it’s hard. And when you succeed, it can also be heroic because you’ve gotten through that.”

Hoffman and the team would eventually create something heroic, as eBay would acquire PayPal for $1.5 billion in 2002.

With his newfound wealth, Hoffman had every intention of taking a year off and recalibrating. But there was one thing on his mind that he couldn’t shake, and he couldn’t wait a year to revisit it.

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