Yammer founder on PayPal: Understanding the power of virality…

I spent an evening last week with the founders of the private social network Yammer, Box.net, and Zendesk, and I wanted to share a conversation I had with Yammer co-founder David Sacks and his pedigree at PayPal.

I have a fascination with PayPal and its alumni because they have gone on to build and invest in some of Silicon Valley’s top companies: YouTube, LinkedIn, Facebook, Zynga and many more.

Here’s a partial list of PayPal’s founders and their achievements:

– Reid Hoffman, founder of LinkedIn and a very successful angel investor: Facebook, Ironport, Digg, Flickr, Ping.fm, Last.fm, Zynga.

– Peter Thiel and his hedge fund Clarium Capital. Not all of his bets have paid off but he is investing and funding some interesting organizations.

– Elon Musk, head rocket designer at SpaceX and CEO of Tesla, a native of South Africa.

– Steve Chen, Chad Hurley, the YouTube co-founders.

– Premal Shah who is founding president of Kiva.org.

– Jeremy Stoppelman, the co-founder and CEO of Yelp.

– Max Levchin, co-founder of Slide, Yelp.

– And there are plenty more in this group: Dave McClure, Jared Kopf, Eric Jackson, Keith Rabois, Ken Howery…

I asked Yammer’s David Sacks what was it about Paypal that created such an explosion of Silicon Valley startups?

– He said that it was a group of people who had recruited each other because they had known each other for many years. The founders recruited people they had gone to school with, and that was repeated throughout the organisation.

– Also, PayPal was one of the first companies to understand the power of virality. Paypal was used because small merchants understood the value it created, and they shared that. Understanding the power of viral businesses is what is key to Yammer’s success.

Did you leave money on the table?

“We sold for US$1.5-billion but some people say that if Paypal were a standalone business (it is part of eBay), it would be worth US$15-billion today. But you have to remember that at the time most of our business was on eBay, and they had launched a competing product that they were giving away for free. So it was a risky time for us. But I’ve been away from the business for a long time and haven’t been paying attention to how Paypal is doing. But they haven’t changed their fee structure since I was there so I think they have some headroom and they could get away with charging a bit more.”

How often do you use Yammer?

“I’m on Yammer ten, twelve hours a day. I use it thirty times a day at least.”

Now, compare this to Twitter co-founder Ev Williams who Tweets only twice a day.