PayPal: Pay $20 Per Signup?

It is late 1999. You are a PM at Confinity (the company that will shortly merge with X.com to become PayPal). You have a product that allows people to beam money between Palm Pilots using infrared ports. It's technically impressive, but it's a niche tool for tech geeks in Silicon Valley.

Peter Thiel and Max Levchin see a bigger opportunity: the web. eBay is booming, transacting millions of dollars a day in Beanie Babies and laser pointers. But the payment infrastructure is medieval. The only way to pay for a winning auction is by mailing a personal check or a money order, which takes weeks to clear. People are desperate for a way to pay online instantly.

You've pivoted to 'Email Payments,' allowing anyone to send money via email. But growth is linear. You have $5M in the bank. You need to reach critical mass before eBay builds their own system or a major bank crushes you. You are about to make one of the most famous growth bets in Silicon Valley history.

This is a Tier 2 Growth Match. You must navigate the cold start problem and a war with a giant platform.

The principle: In a network effect business, acquiring the network is more valuable than preserving the capital. "Blitzscaling" requires buying distribution before the incumbents realize what you are doing. The cost of user acquisition in the early days of a network is an investment in a moat, not an operational expense.