Max Levchin on how Peter Thiel reacted to losing his entire investment in his co-founder’s startup

When assembling the found team for PayPal, Max Levchin wanted to recruit Luke Nosek. But he was worried at how Peter Thiel would react given that Peter lost his entire investment in Luke’s failed startup SmartCal:

“I was certain that Luke and Peter would not get along because Luke had just lost all the money Peter invested in his startup… I never had investors up until this point, so I was really not familiar with the relationship you have.”

With trepidation Max told Peter that Luke was really bright and worth trying to work with again. And he was surprised at Peter’s response:

“Oh of course. I should’ve thought of that myself.”

So you’re not mad it him? Max asked.

“No, he’s brilliant.”

Then Peter recruited Luke while Max recruited the rest of the PayPal founding team.  After PayPal, Luke went on to work at Peter Thiel’s venture firm, Founders Fund.

I think this is an important lesson on failure. Statistically, the vast majority of startups fail, and the best investors know how hard it is to build something brand new and innovative.  Very few people succeed on the first go-around, and it’s not necessarily a reflection on you if your startup fails.

Obviously you don’t want to fail, but as Vinod Khosla puts it: “to do something exceptional, you have to be willing to fail.”

Video source: @twistartups @jason (2018)