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Affirm founder and CEO Max Levchin is ready to put Elon Musk, Peter Thiel and Reid Hoffman on the list of billionaires and, as the youngest member of the so-called PayPal mafia, to add his name to the three-point club.
Affirm, the online lender Levchin founded in 2012, announced in its updated IPO prospectus on Tuesday that it would sell shares for $ 33 to $ 38. At the high end of that range, Levchin’s 27.5 million shares, which make up about 11% of total shares outstanding, would be worth just over $ 1 billion.
These stocks are locked in for the next several months, so the actual value of the Levchin stake will depend on the market reaction and Affirm’s performance as a public company. At $ 38 per share, Affirm would be worth $ 9.2 billion.
Levchin, 45, has made a lot of money in the past, if not as much as some of his former colleagues. A few years after leaving PayPal, he founded the social applications company Slide after selling the company to eBay in 2002 and sold it to Google for $ 182 million in 2010. He was the first investor in Yelp, co-founded by Jeremy Stoppelman, a former PayPal colleague. He was chairman until 2015 and spent three years on the board of Yahoo!
The term “PayPal Mafia” caught on about 15 years ago when early employees of the payment company founded YouTube, LinkedIn, Yelp, Palantir and SpaceX. Musk, who founded SpaceX, is by far the richest of the crew, with assets currently worth $ 175 billion, largely due to his stake in Tesla, which he has headed since 2008.
Thiel, who turned most of his attention to investing, made over $ 1 billion from an early check he wrote to Facebook where he is still a director, and now has an estimated net worth of $ 6.6 billion . Hoffman, co-founder of LinkedIn in 2002, is worth roughly $ 2 billion after selling the professional networking company to Microsoft for $ 27 billion in 2016.
Levchin was born in Ukraine and immigrated to the United States with his family as a teenager. He settled in Chicago. After graduating from the University of Illinois with a degree in computer science, he moved to Silicon Valley and was introduced to Thiel by Luke Nosek, a college friend. They soon started Confinity with Thiel as CEO and Levchin as chief technology officer.
In 2000, Musks X.com merged with Confinity and the combined company was named PayPal. EBay bought it two years later for $ 1.5 billion.
Affirm marks Levchin’s return to financial technology. The project was originally part of Levchin’s incubator HVF before being spun off as a standalone entity in 2012. The company has grown rapidly in recent years and has teamed up with online retailers by allowing them to offer credit at the time of checkout. With this service, consumers can repay the loans over a period of three, six or twelve months.
Revenue, which ended in June, nearly doubled to $ 509.5 million. However, the cost of buying loans from banking partners and the provision for loan losses accounted for more than half of sales, resulting in an operating loss of $ 107.8 million for the year.
Affirm’s largest partner, Peloton, accounted for 28% of its sales in fiscal 2020 and 30% of its sales in the most recent quarter as the ongoing coronavirus pandemic spurred people to exercise at home. In May, during the first few months of the crisis, Levchin told CNBC that demand for electronics had doubled and fitness at home had grown almost as much. He said dealer registrations had “increased massively”. Other trading partners are Reverb Guitars and Nordstrom.
“While travel, ticketing and fashion are all down, and we know they are all down, the massive shift from offline to online is powerful,” Levchin said at the time. “People are changing their habits very quickly and the biggest trend is to find out what can be bought online instead of going outside.”
Less than two years after raising money at a valuation of $ 2.9 billion, Affirm goes public with a market cap of nearly $ 10 billion.
The IPO will bring big profits to other PayPal mafia members in addition to Levchin. The Founders Fund, Thiel’s venture company, owns approximately $ 650 million in the high end of the range. Keith Rabois, formerly Executive Vice President at PayPal and now a partner at Founders Fund, is on Affirm’s board of directors.
Rabois had a big December when Airbnb, DoorDash, OpenDoor and Wish, companies he supported early on, went public.
Former PayPal CFO Roelof Botha, partner at Sequoia Capital, is on the board of Unity (along with Levchin), who made his debut last year. His firm is heavily involved in Snowflake, Airbnb, and DoorDash, the three largest tech IPOs of 2020.
CLOCK: Confirm partners with Shopify
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