August Interview: Erik Klein, Lucky 13 at PayPal and YouTube

This month, Jelly Theory sat down with Erik Klein. Currently the CTO of SofaLabs, Erik was employee #13 at both PayPal and YouTube, hence Lucky 13.

Erik, how did it all begin?
I was a tech geek in high school. I went to the same high school as the co-founder and former CTO of PayPal, Max Levchin. He moved from Ukraine during our sophomore/junior year. We were in the same band and part of the same BBS communities. Back then, there was no concept of an Internet identity.

How did you stumble upon PayPal?
In 1999, it was the height of the boom before the first Internet bubble burst. Companies such as Webvan and Pets.com were getting huge. It was hard to find programmers. If you knew good programmers, you grabbed them. PayPal was becoming real. Max asked me to join the PayPal team. Rather than work a corporate job in Chicago, I flew out to Silicon Valley. In the beginning, I slept on Max’s floor as I worked 16 hours a day and searched for an apartment.

What was your role at PayPal and later at YouTube?
I worked at PayPal for 6.5 years. While I was there, I wrote customer service software and was responsible for the CS team, making sure sure that software development was going in the right direction. At YouTube, I wrote ad software and worked on Google AdSense integration.

Having left PayPal for some time now, what's your view on the online payment space? How is it innovating, and who are new players to watch for?
PayPal facilitates two kinds of commerce: merchant sales and person-to-person transactions. Buying from a merchant is less risky because the merchant is liable for payment. New platforms such as Facebook have potential to take up the peer-to-peer market. However, the biggest problem that most people don’t realize about online payments is massive fraud. Thirty percent of PayPal’s efforts involve fighting fraud.

PayPal is no longer the small startup it used to be when you first joined. From your perspective, how has the company evolved?
PayPal started out as a startup with core beliefs that were set up by its founders: hard work, rapid innovation, a high standard of security, and engineering-driven processes. PayPal was a tech company above a business-oriented company. Over the course of my six years there, I saw the company grow. The initial culture diluted, beliefs thinned out, and the company made compromises. There wasn’t anything right or wrong about PayPal’s evolution, but a natural course that many startups take as they make it and become larger.

So, what brought you to YouTube?
In December 2005, I took a month off from PayPal and realized I wanted to work at a smaller company again. I didn’t enjoy the slower pace of a large company in terms of moving a product forward. At a startup, you build features and make every decision along the way to push them out in good time. I joined YouTube because I knew the engineers from PayPal and enjoyed working with them - I liked the people. I was also excited about using Python as a language.


What was it like at YouTube after Google acquired it?
YouTube is the second largest search engine on the Internet, so Google owns the #1 and #2 engines. Using Google Search was a big win for us. After Google acquired us, Google was good about leaving us alone and allowing us to develop as a company as before. Google realized that we were a winner in the online video space and told us that its team wouldn’t come to us, but if we needed anything, to let them know. Unlike PayPal, YouTube was a company for only a year before it was bought out. PayPal was 4.5 years old and relatively mature. YouTube was small, and Google gave us freedom to do things the way small companies do.

What is it about Silicon Valley that makes it so conducive to entrepreneurship? Do you think such an ecosystem can be replicated elsewhere?
Going back, Silicon Valley started with the combination of Stanford, semiconductor companies, and older industrial technical companies such as IBM, National Semiconductor, HP, and Apple. These companies made up the first generation of the Valley, and its employees went about in buttoned-up shirts and Heroes glasses. Then came the next generation of hackers. Now we're in the platform generation. If you’re building a site now, it would be silly to build it yourself because there’s so much to leverage. In 1999, sites took a long time to build because it was all about PHP and Python; engineers built everything from scratch. Now you can make a site happen in weeks. This generation can be described as a Lego generation: you piece things together and fail fast. You don’t have to build a user base by yourself with features such as Facebook Connect.

You've been in Silicon Valley for ten years now. Any lessons to share?
Spend the majority of your efforts on the stuff you have to do and don't worry about your teammates’ work. At a startup, your team is your family: you talk over dinner and share opinions, but there has to be a baseline of trust. You need to worry about your stuff and get your stuff done. Respect your teammates and treat them fairly. Don’t let petty issues get in the way of your relationships.

What has been a memorable moment of your career here?
The PayPal IPO party: It was the only party I attended on Friday and was still sore on Monday.

Many entrepreneurs work as life. Thoughts?
When I was 24 and working long hours at PayPal, the head of DBA, Paul Tuckfield, was working long hours, but he also had a family and even managed to perform music every Friday. He was someone to look up to. I don’t believe in your work destroying personal life: you can work hard and have a personal life. It comes down to working smarter and understanding that if you put in a full day at work everyday, your work will get done.

And finally, please define entrepreneur:
An entrepreneur is someone who feels responsibility for everything he/she works on.

Thanks Erik! We're rooting for your next venture...