If you have used the Buy Now Pay Later (BNPL) company Affirm for a long time, maybe you have thought about who started and founded the company?
The ecommerce world has been deploying Affirm’s innovative BNPL credit approach for many years. So it’s natural to be curious about the fintech company’s origins.
So who started Affirm? Why did they start the company?
Let’s explore the answers below.
Max Levchin: The Man Behind Affirm
Max Levchin, a well known tech entrepreneur, is the founder and CEO of Affirm.
Levchin has been a major player in the tech industry for many years. Before starting Affirm, Levchin co-founded PayPal and later was the Chief Technology Officer (CTO). Levchin was actually part of what is known today as the “PayPal Mafia“.
The PayPal Mafia is a group of early tech entrepreneurs that worked at PayPal and later went on to become famous, at least in the tech and Silicon Valley busiuness world. The PayPal Mafia included Elon Musk and venture capitalist Peter Thiel. Both of who have helped found or fund many companies which include SpaceX, Tesla, SolarCity, Facebook, and more.
The PayPal Mafia also included Reid Hoffman, the founder and creator of LinkdedIn. David Sacks, a venture capitalist and new AI czar for Donald Trump.
PayPal is now one of the most widely used digital payment systems around the world for consumers and businesses. Good precursor to founding a BNPL company.
Max Levchin founded Affirm in 2012. He actually came up with the idea for a better and more humane lending system when he went to purchase a convertible car. This was after he sold a PayPal to eBay for $1.5 billion dollars.
Levchin was obviously wealthy at this point in his life, having netted millions of dollars from the sale of PayPal to eBay. To his surprise the car salesman came back and said he had horrible credit, so he would have to purchase the car with cash.
Not an issue for Levchin but the experience left him embarrassed. His future wife and a business colleague were at the dealership with him. Can you imagine a billionaire or millionaire with bad credit?
This made Levchin explore what he could do with tech skills and experience to improve the credit system. He thought there must be other people like him, maybe not millionaires, but that mismanagement credit but were still worthy of lending to. This led him to eventually start Affirm.
After his embarrassing car buying incident he understood that the bad credit and credit card company system treats consumers. Especially those from marginalized communities.
Affirm’s BNPL model allows customers to make purchases and spread the cost over time without hidden fees or compounding interest. Compared to credit cards which do have interest compound, Affirm has a zero or capped interest rate for it’s longer term loans.
Affirm went public in January 2021 under the ticker symbol AFRM. This marked another milestone in Levchin’s impressive career in tech.
Max Levchin Life and Education
Max Levchin was born in Kiev, Ukraine in 1975.
Levchin spent his early years in a rapidly changing Soviet Union. Growing up, he displayed a high level of aptitude for math and computer science.
This was unsurprising since both his parents are physicists. In an interview with Guy Raz on the hit show How I Built This he discussed how his entire family are physicists and well known ones.
His mother had access to some of the first computers from her job, so this let Levchin explore the power of computers early in life. This also gave Levchin curiosity and problem-solving skills from a young age.
Moving to the US
Like a lot of great American entrepreneurs Max Levchin is an immigrant.
In 1991, when Levchin was 16 years old, he and his family immigrated to the United States. The Levchin clan came to America to escape Jewish persecution in the Soviet Union.
The family settled in Chicago, trading borscht for deep-dish pizza.
He excelled at Mather High School in Chicago. “I was one of those foreign kids that was really good at math.” he said in his How I Built This interview.
After high school Levchin enrolled at the University of Illinois at Urbana-Champaign. What did he major in? Computer science.
Remember above how he had bad credit when purchasing a convertible? That happened while he was a college student and he signed up for credit cards when someone was on campus selling to students. Since he didn’t understand how credit cards worked, this led to him having terrible credit. Even a guy that is good at math can make financial mistakes.
During his time at the University of Illinois, Levchin was honing his programming, coding, and computer skills. This later would prove to be key to when he moved to Silicon Valley.
PayPal
Levchin co-founded PayPal in 1998 with Peter Thiel. As the Chief Technology Officer (CTO) he was in charge of handling and building the company’s digital payments and anti-fraud technology. His technical skills were a key element in PayPal’s early success of dominating digital payments.
PayPal’s rapid growth in a few years led to its acquisition by eBay in 2002 for $1.5 billion. Levchin’s personal stake in PayPal netted him a nice $34 million. This marked a significant milestone in Levchin’s career financially and professionally.
Ventures After PayPal
After PayPal, Levchin dove into new business projects.
He started a social media sharing service called Slide. This was later sold to Google in 2010 for $182 million.
This lead to him working for Google for a period of time as Head of Engineering for the division that oversaw Slide. Google shutdown Slide later and Levchin then left again. He wanted to work on new ventures.
After leaving Google Levchin served as chairman of Yelp. At one point in time he was the company’s biggest shareholder. He helped steer the Yelp through its IPO in 2012. Scoring another big win for in tech success.
Levchin then started HVF (Hard, Valuable, and Fun), an innovation and start-up lab. With Levchin’s reputation, capital, and tech experience HVF serves as a way to invest and try to use tech and business to solve problems in the world.
The Start of Affirm
As already discussed Levchin recognized a gap in the market for transparent, flexible payment options. He observed that credit cards often left consumers frustrated and burdened with hidden fees and debt. Much liked he experienced unknowingly in college.
This realization sparked the idea for a new approach to lending that would make clarity a key part of the business.
When Levchin started Affirm he wanted to address several key issues;
- Lack of transparency in credit card terms.
- High interest rates and hidden fees on credit cards.
- Limited payment flexibility for consumers.
- Outdated and often unfair credit scoring models.
By identifying these key pain points, Levchin saw an opportunity to create a more consumer friendly lending product that would disrupt the payment industry. Much like he did with PayPal.
Affirm and BNPL
When you use Affirm and BNPL what do you get?
- Fixed Interest Rates: Unlike credit cards Affirm has a zero or fixed interest rate.
- Flexible Payment Options: Consumers can choose a short term pay-in-4 loan or longer term payback.
- Instant Approval Process: Approvals for Affirm are instant using the company’s algorithm.
Affirm’s platform uses advanced algorithms to assess creditworthiness. Unlike most traditional lenders, Affirm looks beyond traditional credit scores.
This approach opens doors for consumers who might be overlooked by conventional lenders, and opens up a customers that Affirm can serve that other financial institutions will not.
Affirm currently trades on the NASDAQ under the ticker symbol AFRM. As of this writing the market cap of Affirm is roughly $20 billion dollars.
Max Levchin
Max Levchin’s journey from Ukrainian immigrant to tech pioneer is a great American success story.
As Affirm’s founder and CEO Max Levchin has helped consumers by offering more transparency and flexibility with BNPL lending options. His leadership has propelled Affirm to be one of the big 3 players in BNPL industry, along with Afterpay and Klarna.
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