The Sharp Startup: When PayPal Found Product-Market Fit

Reflections on the 20th anniversary of a $100+ billion product

Twenty years ago this month, PayPal found product-market fit. I remember the moment vividly because it’s a dramatic example of a strategy that still works today. I call it “going Sharp.”

Whereas the average startup launches a bunch of features for a bunch of use cases to appeal to many possible users, the Sharp Startup focuses on a few killer features for the most desperate customer segment. In short, it finds a wedge into the market.

The Sharp Startup focuses on the most desperate customer segment. It finds a wedge into the market.

While it’s important to have a larger vision, the Sharp Startup remains opportunistic and agile enough that when it spots this kind of opening in the market, it drops everything else and drives all of its troops through it.

I recall the moment that happened at PayPal. I was sharing an office with Luke Nosek at the legendary 165 University Avenue in Palo Alto. Luke ran marketing while I was in charge of product. It was a contrast in styles as Luke was terrific at brainstorming new ideas whereas I was obsessed with getting the product to work. Crammed into a tiny office, our impromptu jam sessions resulted in some great collaborations.

In November 1999, our customer service rep forwarded me an email from an eBay power seller. The eBay seller had turned the PayPal logo into a nice-looking button for her auctions and was asking our permission to use it.

Ironically I was forwarded the message not for product reasons but because I was temporarily handling the company’s legal affairs, owing to a law degree I’ve hardly ever used. It was a potential trademark infringement question.

At the time, we were vaguely aware of the auction use case but it was discussed along with splitting dinner tabs, student allowances, and a bunch of other nebulous value props. The truth is that we thought “emailing money” was a terrific product idea but we had no idea who would actually use it or what the market would be.

Luke had come up with PayPal’s now-famous $10 signup and referral bonuses to encourage the product to spread. But without a clear picture of the ideal user, we didn’t know who to target, and adoption had been tepid.