Elon Musk

Elon Musk founded Zip2 Corp., a Web-based city and community guide firm, in 1995 and X.com, a now defunct online financial services provider, in 1999. In February of 1999, Musk sold Zip2 to Compaq Computer Corp. for $305 million; it now helps to power the Alta Vista search engine owned by Compaq. Although he decided to shutter the original X.com banking and investment services operations inOctober of 2000, Musk still plays an integral role in PayPal, the firm X.com merged with shortly after its inception.

In his twenties, Musk earned a degree in physics from the University of Pennsylvania and a degree in business from the Wharton School. After dropping out of the Ph.D. program in energy physics at Stanford University, Musk founded Zip2 at the age of 24. Via agreements with the likes of the Chicago Tribune and the New York Times, his new company began providing both local and national news, entertainment, and related online content to various metropolitan communities. A planned merger with CitySearch fell through in April of 1998. Less than a year later, Musk sold Zip2 to Compaq Computer for $305 million in a deal proclaimed one of the largest Internet-based cash payments to date. Compaq used the customization features of Zip2 to create MyAltaVista, a personalized version its popular Web portal.

Once the deal with Compaq was completed, the young millionaire began pursuing his next venture: X.com. Initially, Musk founded X.com with plans togrow it into a full-scale financial services site that offered everything from checking accounts to insurance and investment options. To help him run his new venture, Musk hired investment banker John Story as executive vice president and Bill Harris—the CEO behind Intuit Corp.'s aggressive Internet push—as president and CEO. Musk appointed himself chairman. Investments from Musk, Harris, and Sequoia Capital totaled $25 million.

Launched in December of 1999, X.com began offering $20 to anyone who opened a free online checking account in an effort to secure its first customers. Musk also put in place a referral program, giving $10 to any member who signed up a new customer. He planned to make money in the same way that traditional lenders did by relying on the interest rate spreads. Within two months of its launch, X.com had secured 100,000 customers, coming close to matching the client base of its largest competitor, Etrade Telebank, which had 130,000 customers. While the firm's growth was impressive relative to its rivals, convincing customers to trust virtual banking proved difficult. This problem was exacerbated when X.com was forced to make public the fact that hackers had been able to illegally transfer funds to its accounts. As a result, the firm began requesting cancelled checks before accepting transfers from outside accounts.

In March of 2000, Musk orchestrated the merger of X.com and PayPal, an online payment services provider that had been operating since late 1999. Successful in the person-to-person (P2P) online payment industry, with nearly 15,000 new clients signing up each day, PayPal began looking to business-to-consumer (B2C) and business-to-business (B2B) markets shortly after the merger was completed. Customers willing to deposit money into an X.com account by electronic fund transfer, credit card transfer, or check were able to make instant payments, via email, to participating PayPal businesses.

Management disputes between Musk and Harris resulted in the resignation of Harris after a short six-month tenure. Musk announced a dramatic shift in focus in October. According to Megan J. Ptacek, a writer for American Banker, Musk decided that "rather than offer a wide range of banking and related services," his firm would "become solely a global payment system." Soon thereafter, X.com changed its name to PayPal. The firm spent the latter half of 2000, as well as most of 2001, focusing on international expansion efforts, as well as on increasing its B2B and B2C operations.