Confinity

» see confinity.com as it lived, on the wayback machine

~ the last words ~

Confinity was founded in Palo Alto in December 1998 by Max Levchin, Peter Thiel, Luke Nosek, Ken Howery and Yu Pan. The pitch was cryptography on handheld computers: Levchin had spent years on security problems and the PalmPilot was the first pocket device with enough processor to do real key exchange, so the company set out to make a wallet you carried. Money would move between two handhelds the way a business card did, over the infrared port, with no bank in the middle of the gesture.

They announced the payment service in July 1999 and called it PayPal. At the launch event Nokia Ventures put $4.5 million into the company by beaming it from one PalmPilot to another in front of a room of reporters, which is a better demo than most products ever get. The web version existed because not everybody at the event owned a Palm. It was the fallback, and within months it was the entire business, because eBay sellers had been accepting personal checks in the mail and here was a way to take money from a stranger the same day.

The growth came from paying for it. New accounts got ten dollars for signing up and ten more for a referral, and the company burned venture money to buy a user base before anyone else could. Three blocks away on University Avenue, a startup called X.com was doing exactly the same thing with the same incentives, which meant two companies were subsidizing the same customers in the same market on the same street. They merged in March 2000. The surviving entity kept the X.com name, and Confinity stopped existing at fifteen months old.

~ the record ~

~ the beaming part ~

Handheld-to-handheld payment did not fail because it was a bad idea. It failed because the installed base was wrong. The PalmPilot was a professional's organizer and both parties to a transaction had to own one, while the two people who most wanted to send money over the internet were usually nowhere near each other. The web version simply accepted everything the beaming product had been built to avoid, and the market turned out to be on the web. The infrared feature was quietly dropped once the numbers were clear.

~ the merger of enemies ~

X.com had been founded in 1999 by Elon Musk with Ed Ho, Harris Fricker and Christopher Payne, chartered as an actual online bank with far broader ambitions than a payment button. The merger in March 2000 was negotiated as roughly equal, and it was miserable. The two engineering groups disagreed about almost everything, starting with whether the product should run on Windows or on Unix, and the disagreement was never really about servers.

In September 2000, while Musk was out of the country, the board replaced him as chief executive with Peter Thiel. The banking ambitions went with him. The company narrowed to payments and renamed itself after the product in June 2001. PayPal went public on 15 February 2002 and eBay bought it that October for $1.5 billion, having spent the previous two years trying to beat it with a competitor of its own.

What the merger produced beyond the product was a hiring cohort. The people who came out of that building went on to found or fund a very large share of the next decade of Silicon Valley, and they got a collective nickname for it. Confinity is the half of that story with the shorter name and the stranger original plan.

~ the turkish footnote ~

The thing Confinity built eventually reached Turkey and then left it. PayPal operated here for years and shut down Turkish operations on 6 June 2016, after the banking regulator refused to renew its license over a rule requiring payment providers to keep their IT infrastructure inside the country. PayPal would not localize its systems for one market and walked. Thousands of small sellers lost their cross-border checkout overnight, and it has not come back since.

What filled the hole was local. Turkish payment companies took the domestic side of the market and the cross-border side stayed awkward, which is roughly the opposite of what a company founded to move money between two strangers' pockets was aiming at. The infrared wallet failed on installed base in 1999 and the global version failed here on jurisdiction seventeen years later, which are different problems with the same shape underneath them.

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