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Max Levchin, who in his past life started PayPal and Slide is back at it again. He has started a new hybrid R& D Lab/Incubator (HVF) and his focusing on opportunities created by the digitization of our physical world and explosion of data.

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After selling his second company, Slide, to Google for hundreds of millions of dollars, Max Levchin slipped into a state of blissful anonymity, focusing his energies on his kids and cycling. Of course, like most entrepreneurs, he eventually couldn’t resist the siren call of the startup life. Levchin, who was co-founder of PayPal is returning to the arena with HVF, which stands for Hard, Fun and Valuable  , a San Francisco-based venture that at best can be described as a R&D Lab crossed with an incubator. He started it in 2011 and so far has funded it himself.

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PayPal co-founder and HFV CEO Max Levchin at DLD 2013 Conference in Munich Photo by Om Malik

It is not the first time Levchin has turned to such a structure. In early part of the 21st century, he started MRL Ventures, with backing from Peter Thiel, who was chief financial officer of PayPal. MRL resulted in ten startups; two became successful — Slide and Yelp — while one, AdRoll, briefly flirted with bright lights. Others withered away. Levchin is betting that lightning will strike twice. “It is the same approach, but this time it is around data,” said Levchin.

The Kiev, Ukraine-born entrepreneur made his big pitch at the DLD conference in Munich in a speech that needed parsing. So we ended up having a chat about his plans.

When Sensors Meet Data

The focus at a very basic level is “data” and how it will influence our daily lives. Max believes — and I most certainly agree — that we are going to see digitization or penetration of technology into parts of our lives which have been hitherto untouched by it. Whether it is sensors or smartphones, we will have data emanate from different sources, and using that data to shape experiences is a big opportunity.

The word he used in our conversation often was “friction” or how sensors, embedded computing and the data that will result will reduce friction and inefficiency in many of our daily tasks. He pointed to Uber, the on-demand transportation service based in San Francisco as an example.


“The world of real things is very inefficient: slack resources are abundant, so are the companies trying to rationalize their use. Über, AirBnB, Exec, GetAround, PostMates, ZipCar, Cherry, Housefed, Skyara, ToolSpinner, Snapgoods, Vayable, Swifto…it’s an explosion! What enabled this? Why now? It’s not like we suddenly have a larger surplus of black cars than ever before.

Examine the DNA of these businesses: resource availability and demand requests — highly analog, as this is about cars, drivers, and passengers — is captured at the edge, automatically where possible, then transmitted and stored, then processed centrally. Requests are queued at the smart center, and a marketplace/auction is used to allocate them, matches are made and feedback is given in real time.

A key revolutionary insight here is not that the market-based distribution of resources is a great idea — it is the digitalization of analog data, and its management in a centralized queue to create amazing new efficiencies.”

“As we become more connected, we can make things a lot more efficient around us,” he said. “There is a lot of change that is going to happen.” Levchin pointed to a future where sensors in our clothing communicate with our in-home systems and adjust the temperature of our environment based on our body conditions.

Say No To The Four-Year Startup Cycle

As we talked about his plans, I couldn’t help but notice a certain level of maturity. Whether it is age or the fact that he is a family man, the older Levchin is in less of a hurry and is taking a more nuanced and longer view of the world. When asked, he said that it is time to get off the four-year-cycle of the Silicon Valley startup.

However, to solve bigger problems, sometimes you need a longer horizon: a ten-year schedule for example, Levchin said. “At PayPal, we viewed the world in a four year horizon,” he said, “Because that is how the valley worked. Had we thought it as a 20-year old company, the whole thing would be different.” He believes that for some odd reason being a 10-to-15 year old technology company isn’t cool, but that thinking has to change in order to get bigger breakthroughs.

The four year-cycle implies a certain pacing and if you don’t show returns in that time, people start quitting — whether it is your investors or employees, he added. Sure, some break out — Google and Facebook for example — but “we need more of those breakouts,” Levchin said.

It is a common refrain within the group of folks popularly known as the PayPal Mafia. Thiel, a controversial investor, has been most vocal of the lot. There is Elon Musk, the real life Tony Stark, who is probably the most successful. Levchin, too wants to make big impact with his new efforts.

The story of HVF

Levchin started HVF in 2011 with the notion of “going for bigger and longer term projects.” HVF, he said, will essentially be a vessel for working on his ideas and he will have a team, but some of those ideas will become mature enough and will be spun out as separate companies.

So far, he has about a dozen engineers working with him and he is close to announcing at least two projects later this year. But he is not willing to put down any dates, because again, he feels that it makes the efforts part of a rat-race. “Launch time frame is tied to value creation,” he added. It is one of the primary reasons why he is funding HFV himself.

Flush from the sale of Slide to Google, and thanks to his other investments in different PayPal Mafia companies, he has enough to self fund this new quest. However, that doesn’t preclude companies coming out of HVF from raising money from outside investors, Levchin said.

From the archives: A video chat with Max Levchin

  1. Wasn’t Slide a big flop – raising a ton of VC money, never finding an audience or business model, and finally bailing out to Google, which shut it down? Might have lined the founder’s pockets, but huge amount of money was invested for no return.

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    1. @Sbpots –

      Yes, Slide was a big flop. However, they were able to put up a “dog and pony” show in front of Google and cash out.

      Dev

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  2. Om, nice article. I appreciated reading especially the human element of Max and how he has changed his view about the cycle (4-year v.s. longer term) as he has aged and become wiser. This is very refreshing especially for those in Silicon Valley which seems to stress youth and the next Harvard or Stanford drop out. Also, what made me smile when reading this article is that Max has this longer-term view now, and while he seems to feel its new (compared to the 4-year cycle), one can look at the late Steve Jobs who held the longer term view most of his life as well. Good luck Max!

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  3. Om, thanks for including AdRoll in today’s your article. However, we don’t consider ourselves to have “briefly flirted with bright lights.” On the contrary, we were named the fastest-growing privacy advertising company by Inc. Magazine in their 2012 Inc. 500|5000 listing and the fastest growing private company in the Bay Area this past year by the SF Business Times.

    We’re super excited about the future of retargeting, especially Facebook Exchange, and would love to share our 2012 growth and plans for 2013 with you at any time (press@adroll.com).

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  4. Medicine is pretty broken these days, but there are several hot prospects that present themselves. One example is to apply a fraction of a megabuck to do a serious clinical trial to any of several hot supplements that are too small to afford it on their own. Finding a way past or through the FDA is a political issue, but popularity is an asset. See Aubrey de Grey’s “Ending Aging” for a great overview of an incredible marketing opportunity.

    Another would be to cure virtually all cancers by screening for early signs and using known but forbidden cures and watching them work by tracking nagalase levels using a test rather like the incredible screening test invented by the 14 year old Jack Andraka. It will appeal to some because of the vital use of carbon nanotubes. Let’s talk about it.

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