“Max” Levchin is a Ukrainian-born American computer scientist. In 1998, soon after graduating from college, he co-founded (with Peter Thiel) the company that eventually became PayPal. Levchin notably made contributions to PayPal’s anti-fraud effortsand is also the co-creator of the Gausebeck-Levchin test, one of the first commercial implementations of a CAPTCHA challenge response human test.

He has also founded or co-founded the companies Slide.com, HVF and Affirm. He was an early investor in Yelp and was their largest shareholder as of 2012.

He does invest in startups. If you want to pitch to him, record a pitch video, post it on YouTube, and sending him the link via Twitter. That is how he prefers it.

The interview below is a compilation of his career advice. You should read and reflect carefully

How did your early life help shape you into who you are today?

We are all shaped by our earliest experiences. I grew up in the twilight days of Soviet Union, watching an empire crumble and opportunities appear out of nowhere, and changed countries and continents as a teenager. The sense of infinite possibility and the required adaptability proved very useful.

What are some tips for a college student wanting to start their own business?

Just go for it: very little to lose, lots to gain, the greatest of which is experience. Failure is cheap while in school.

How has motivation changed for you over the years?

I used to value hard problems, now I value valuable ones.

How do I get started in angel investing?

Ask friends that are starting interesting companies to let you invest a little bit.

What has being a parent taught you that you use in your business life?

Communicate clearly, listen intently, have lots of patience.

What type of software companies will proliferate in next 5-10 years?

Those that combine inherently analog processes (genetics, biology, physics) with digital controls.

If you didn’t know anyone and had no money, how would you go about starting your business?

Move to a place like the Bay Area,  join a startup to learn by doing, and start meeting people.

Is age considered to be an important factor in entrepreneurship? I’m 25 but still haven’t created any company yet. Is it too late?

Never too late to start!

But I’d do it sooner than later — less to lose while you young[er].

What is more exciting, being an entrepreneur or being an investor?

No contest — being an entrepreneur is a non-stop high. Being an investor is fun too, but you feel less.

How is your relationship with Elon Musk?

Great; we are very friendly.

What was it like being on the board of Yahoo?

Really interesting; extraordinarily educational; time-consuming; at times exhausting. I learned a lot.

Will you invest in companies that make chatbots?

Yes, but not because they make chatbots. I invest in companies that address really hard, interesting problems. If a chatbot is part of the solution, great.

(It’s a bit like asking if I will invest in companies that build apps. 😉

What is one quality that is critical for a CTO?

This is very personal, but I cannot imagine a CTO who isn’t a really strong engineer themselves. Leading by example is essential in technical roles (to me).

What is the greatest lesson from Paypal that’s helping you build Affirm?

People underestimate the complexity of legacy payment infrastructure. Solid knowledge of that helps a bunch. More broadly, the greatest lesson is always the same: people is what makes or breaks every company.

What are some tips for new founders tackling fundraising?

Figure out whether you are raising on the narrative or on results. Confusing the two results in bad pitches. If narrative, presentation and design are essential. If results, make sure you pick metrics that are truly impressive, so you control the conversation. Ask people who have done it before for advice.

How hard is it to run two companies at the same time?

You got the wrong guy — ask Jack Dorsey 🙂

Guessing, I suspect this refers to Glow and Affirm. Glow has its own CEO, Mike Huang. I am merely an Executive Chairman.

Does starting companies get easier and less exciting as you do more of it?

Yes, it does. It’s an addiction.

What do most people not realize about PayPal?

Its cost-of-funds arbitrage business model: when you pay with your bank account, PayPal’s cost of funds is very low; when you pay with your credit card, it’s comparatively high. To the consumer, this costs nothing; to the merchant the fee is always the same: depending on which path the consumer took, PayPal either makes money or doesn’t on the transaction.

What does Affirm do? Can you explain the company & products in a layman-friendly way?

Our mission is to improve lives by building honest financial products. We are building the modern bank you are going to love – by bringing transparency and fairness to every service we create. We started with providing simple financing choices at the point of sale – letting buyers split expensive purchases into smaller monthly payments. Our next set of products is all about helping people lead financially safe and responsible lives.

If you could go back to school right now, what would you want to learn?

Still Computer Science, but I’d also do something to prepare me for the new world of genetic engineering-related opportunities.

What are the most interesting fintech startups?

Affirm, but I am very biased, of course. TransferWise, Blend Labs, OpenDoor (I am an investor in one way or another in all of these). Penny, Plastiq, Plaid, eShares, many others.

Very few (IMHO) have really gone out to take down the really big problems/opportunities however, which typically require balance sheet construction and massive amounts of capital.

What is Max Levchin’s relationship with Peter Thiel like now? What was it like at PayPal?

Great, both then and now. Very friendly and mutually respectful.

Why does Max Levchin have 3 kidneys?

Congenital condition, duplex kidney. Not super uncommon, it turns out.

What kind of espresso machine does Max Levchin use?

La Marzocco GS/3 Manual Paddle

Why is Max Levchin against externally hiring managers? What is the downside and how does it weigh against the upside?

I am not against hiring managers.

Experience showed me time and again that many strong, already-cohesive teams almost subconsciously put new managers through an “earn your stripes” period where trust and confidence in the newly-installed leader is tested and, hopefully, built up. Failures and miscommunications during this period can cost organization in both productivity and performance.

Promoting into leadership roles from within the team significantly shortens and simplifies this trust-earning period, for obvious reasons, so that is what I prefer, most certainly in engineering.

If the organization lacks the necessary future-leaders, I won’t hesitate to look for them externally, though dearth of such people signals poor hiring in general.

Who named PayPal?

Master-McNeil (http://www.naming.com/).

What are some good pieces of music to listen to while coding?

Fast (130bpm or faster) trance or techno, purely instrumental, or sung in a language the listener does not understand. Keeps the listener fully awake, and even somewhat tense, and therefore more alert, but does not distract by engaging language-processing brain areas.

Does Max Levchin still pull multiple day coding sprees? If so how?

On occasion, though not as often as I’d like. I have done more marathon coding on trans-Pacific flights (Continental Newark -> Shanghai is fantastic for this) lately than at home or office — not having the usual distractions (email, IM, etc) is really nice.

Does Max Levchin speak Russian?

да, но с уловимым английским акцентом

Among Max Levchin’s lessons learned as a young entrepreneur, which are the greatest?

It’s usually better to have a cofounder than go it alone.

Being an entrepreneur is not about being in love with an idea, it’s about being in love with running a company.

Having a highly homogeneous (background, education, values, preferences, etc) very early team is better than not — cuts down on time-wasting arguments.

You can have successful teams where people hate but deeply respect each other; the opposite (love but not respect among team members) is a recipe for disaster.

If there is any doubt about hiring a candidate for your first 5-6 positions, there is no doubt — do not.

You cannot hire a cofounder.

Do not allow senior managers to develop long-term grudges against each other. You will have to arbitrate those later, a huge time sink.

All compensation information eventually becomes public, and usually eventually == very quickly.

In many cases “working from home” is not really working.

Most often, when someone wants to leave your company, you should let them. Chasing them with offerings of money and power messes up the incentives of others.

Intra-office romance is usually (but not always) bad news.

Figure out one thing each of your investors is genuinely really good at, and insist they help you with that. Among other things it will save you from their help in other areas.

Consider on occasion whether the adjective “relentless” applies to your team. If not, you probably need to step it up.

Leadership by example is the most effective type. If you expect the troops to crank through nights and weekends, better be there yourself, even if you aren’t actually involved in the task at hand. It’s a little irrational, but it inspires people.

(I’ll keep adding to this list as I think of more of these. No doubt the second batch won’t be as good as the first, and so on, but might still be useful to some people. Plus, next time I am asked to speak on this topic, I can use this article as cliff notes.)

One usually raises money on great story or great results. Raise before, or right after launching. Don’t plan to raise a few weeks after launch.

Having a large and complicated cap table is rarely a good idea. Few committed angels is better than $5k from everyone and their brother.

Board meeting should never be product strategy debates. Double true that for product tactics.

Have a cardboard box at board meetings where attendees must deposit their mobile devices at the start for the entire duration of the meeting. At the very least suggest that idea.

Serve food at board meetings.

If you have a cofounder, give them a board seat. If you can, keep one more for yourself, and leave it empty. You’ll need it later.

Cofounders (under usual circumstances) should have same amount of equity.

Raising money between May 20th and August 10th, and Nov 10th through January 15th is somewhat harder than during any other time of the year — many VCs vacation during those times.

Never, ever agree to participating preferred.

Redemption rights are actually OK (it seems to be an East Coast thing), if placed a bunch of years out. Startups shouldn’t be in a limbo for that long anyway.

If you are going for a big raise at a huge valuation, consider the resulting pref overhang (and its impact on future employee motivation) very carefully.

You are not designing for yourself, and shouldn’t be. Most people using the Web don’t understand (most of) what makes it work and don’t want to. Design for those people — there are many more of them than you.

What four startups did Max Levchin found prior to PayPal? Apparently, 3 of them failed, and the 4th did okay.

Odd that anyone should care, but here’s the more or less exact history:

1. SponsorNet New Media (ad banner network, ’94-95)
2. NetMomentum Software (white-label classifieds for newspaper sites ’96)
3. NetMeridian Software, (yeah, I basically wanted to keep the same logo ’97)
4. ListBot/PositionAgent (acquired by LinkExchange, ’98)

The last two were sort of blended (NM technically owned LB/PA, but was not actually sold to LE). This sale is what allowed me and my partner Eric to move to California in August ’98.

Eric went to work for LE, and later Microsoft (which bought LE in November ’98), while I focused on a side project called SecurePilot (one-time password emulator for PalmOS) which ultimately evolved into a product for secure storage for mobile devices (FieldLink), which in turn evolved into a secure wallet/IOU store (Confinity) thanks to influences from Peter Thiel (he and I formally partnered up in December ’98 after much brainstorming), which ultimately became a secure payment platform (PayPal).

After that there was Slide.

What skills do self-taught programmers commonly lack? What should a self-taught programmer study to get up to speed with his/her formally-educated peers?

Numerical methods, performance analysis of algorithms (on paper, as opposed to profiling), and assorted fundamentals of computer science and machine architecture that are best expressed through examples, but inevitably wind up tripping such coders up at various times.  Eg:

Python 2.6.1 (r261:67515, Jul  7 2009, 23:51:51)
>>> 2.03

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