How Bryan Johnson sold Braintree to Paypal for $800,000,000

1. Who is Bryan Johnson?

Bryan Johnson was born on August 22, 1977, in Provo, Utah, United States.

He is the founder of Braintree, a payment processing company that provides web and mobile payment solutions for businesses that he sold to Paypal for $800,000,000 in 2013.

Bryan is currently working on Blueprint, a personal health optimization program focused on maximizing longevity and healthspan through data-driven approaches.

He is also the founder of Kernel, a company creating devices that monitor and record brain activity, and OS Fund, a venture capital firm that invests in early-stage science and technology companies.

2. What did Bryan do before launching Braintree that contributed to his success?

• Starting three companies before Braintree

# When he was still in college, Bryan’s first business was a wholesale provider of cell phone service. He built a team of college students selling cell phones and cell phone plans. This alloweded him to pay his way through college.

# Right before the dotcom bubble, he started a voIP company called Inquisit for which he raised $500,000 from business angels. Bryan said that it was the wrong team, the wrong product and the wrong timing to do so and the company shut off in 2001 because they did not manage to raise more funding.

# Later in 2001, Bryan joined his brother and another partner on a $70 million real estate project. The project struggled to achieve sales goals and required additional capital so they decided to move on.

• Becoming great at sales

After the failure of his real estate venture, Bryan could not find a job. He ended up being hired for a 100% commission-based job where he was in charge of selling credit card processing door to door.
He quickly became the number one sales person out of 400.

• Getting experience in the Credit card processing industry

By working as a salesman in the credit card processing industry, Bryan figured out pretty quickly that the industry was really messed up. 
The technology was terrible and people were just generally plagued by the industry because it is just unscrupulous, dishonest and overly complex.

3. How did Bryan come to launch Braintree?

When he was 21, Bryan told his family and friends that he would start a company and retire by age 30.

After a few unsuccesful entrepreneurial ventures, he ended up working at Sears for eight months. He refers to it as the most unsatisfying thing he has ever done in his life. No matter what he tried to do, he couldn’t make a difference. He decided that he would rather be unemployed than work there anymore.

From his experience selling credit card processing door to door, Bryan realised that the technology was years behind and nobody trusted different providers. It was fragmented with hundreds of providers and after doing it he realized that this was a perfect industry to start a company in.

Bryan figured out that he needed to make at least $2,100 a month to leave and do his own thing. He went to visit his old customers from the credit card processing company and asked them if they would switch to his new company, Braintree. Quite a few of them agreed, collectively generating $6,200 a month. Braintree was officially started.

4. What were the key milestones reached by Braintree?

Growth

• 2009: Opentable hires Braintree to provide his 11,000 restaurant clients with PCI compliant credit card payments and storage.
  
  
• 2010: $4.5MM in revenue, grew from 15 to 24 employees , and doubled its customer base. Braintree was now working with prestigious clients such as: 37signals, GitHub, Uber, Air B&B and LivingSocial.
  
  
• 2011: The company was 47th on Inc. magazine’s 2011 list of the 500 fastest-growing companies. At the time, Braintree was processing about $3 billion in credit card payments annually and generating $10 million in revenue.
  
  
• 2012: The company was 415th on Inc. magazine’s 2012 list of the 500 fastest-growing companies.

Funding

• 2007: Received $25,000 to start the company after winning a business plan competition from the University of Chicago.
  
  
• June 29, 2011: Raised $34 million in a Series A investment from New Enterprise Associates (NEA), Accel Partners, RRE Ventures and Greycroft.
  
  
• September 17, 2012: Raised $35 million in a Series B Investment from Accel Partners.

Strategic Acquisition

• August 16, 2012: Braintree acquired Venmo for $26.2 million.

5. What were Braintree’s KPI right before selling?

• Processing $12 billion in payments annually including $4 billion on mobile.
  
  
• An estimated $100,000,000 to $150,000,000 in revenue.
  
  
• 4,000 merchant-clients.
  
  
• Clients list included: Airbnb, Uber, LivingSocial, Fab.com, OpenTable, Taskrabbit, GitHub and Heroku.
  
  
• 180 employees.

6. The Exit

On September 26, 2013, Braintree got acquired by Paypal for $800,000,000 in cash. Bryan personnaly made around $300,000,000 from the sale.

7. How did Bryan decide to sell Braintree to Paypal?

It goes back to the day when Bryan was 21 and promised to himself that he wanted to do something extraordinary and meaningful. He explained that he wanted to do something that would be worth mentionning in history books in the year 2500.

While what he did at Braintree to improve payment processing was important, he considered that this is not the kind of things that was going to be mentionned in history books because it’s just a functionnal thing. 
Therefore, he decided that it was time to sell and to move on to something bigger.

A few months before selling to Paypal, he was in negotations with Google and Square who were both interested to acquire Braintree.

Nevertheless, they considered that the price of $1,000,000,000 asked by Bryan was too high and they decided to pass.

eBay ( who was the owner of Paypal at the time) promised to let Braintree operate at least semi-autonomously under PayPal which helped convince him to accept the deal for $800,000,000.

8. The Buyer

Paypal is a globally recognized financial technology company that operates an online payments system, facilitating digital payments and money transfers.

It was founded in December 1998 as Confinity by Max Levchin, Peter Thiel, and Luke Nosek. It merged with X.com, an online banking company founded by Elon Musk, in March 2000.

ebay has been PayPal parent company since its acquisition on October 3, 2002. At the time when Braintree was acquired in 2013, eBay’s market cap was $73 billion and they had more than $10 billion in cash.

PayPal’s revenue in 2013 was approximately $6.6 billion​ while eBay’s revenue was $16.05 billion.

9. Why did Paypal acquire Braintree?

PayPal acquired Braintree for several strategic reasons:

• Client Acquisition: Braintree’s client base included high-profile companies like Uber, Airbnb, and OpenTable, which were also potential targets for PayPal’s services. By acquiring Braintree, PayPal ensured these clients remained within its ecosystem, preventing them from turning to other competitors like Stripe.
  
  
• Neutralising a competitor: Braintree was a strong competitor in the payment processing market, particularly with mobile-first and tech-savvy businesses. By acquiring Braintree, PayPal eliminated a direct competitor, consolidating its position in the market.
  
  
• Increasing Payment Volume: By acquiring Braintree, which was processing $12 billion in annual payment volume at the time, PayPal significantly increased its transaction volume, contributing to its growth and market dominance.
  
  
• Enhancing Mobile Payment Capabilities: Braintree was a leader in mobile payment processing which allowed PayPal to strengthen its mobile payments infrastructure.
  
  
• Strengthening Competitive Position: The acquisition helped PayPal to better compete with other payment processors like Stripe and Balance by enhancing its technology and expanding its customer base in the highly competitive digital payments market.
  
  
• Expanding Merchant Services: Braintree’s sophisticated tools and services for merchants, including its easy integration and developer-friendly APIs, complemented PayPal’s existing offerings. This enabled PayPal to provide more comprehensive solutions to businesses of all sizes.
  
  
• Venmo Acquisition: As part of the acquisition, PayPal gained Venmo, which was rapidly growing in popularity for peer-to-peer payments among younger users.

10. What were the key factors of success that allowed Bryan to sell Braintree to Paypal for $800,000,000?

1. Define clear goals

When Bryan started Braintree, he had three main goals that guided all his actions:

• To be the best payment provider in the world for developers.
• To get Braintree employees say it was the best company they had ever worked for.
• That Braintree customers would love the product and customer support so much that they would write them love letters.

2. Explosive growth

For two years in a row, in 2011 (47th) and 2012(415th), Braintree was on Inc. magazine’s list of the 500 fastest-growing companies.

3. Excellence & Clients Satisfaction

Bryan focused on creating an environment where people who interacted with Braintree would walk away and rave about the company product and customer support.

By focusing on client’s satisfaction, 99% of Braintree customers were acquired through word-of-mouth referrals.

4. Building relationships

Building strong relationships has been key to Bryan’s success.

By building relationships with clients when he was working as a door-to-door salesman for a credit card processing company, he managed to convince them to switch to Braintree when he started the company.

Later on, he met the CEO of Open Tables at a local Chicago meet-up which led him to become Braintree’s advisor.

That’s how Braintree got the opportunity to provide services to the 11,000 restaurants of Open Tables which was a pivotal moment for the company.

5. Picking the right market

When Bryan started Braintree, the credit card processing industry was fragmented, with hundreds of providers that nobody trusted, and the technology was years behind. Meanwhile, the online and mobile payments markets were growing at a very high pace.

6. Hiring only the very best

From the start, even with limited means, Bryan focused on hiring only the very best people to join Braintree.

One of his strategies was to offer job seekers a $5,000 finder’s fee if they could refer someone better than themselves for the job.

He was also very focused on employee satisfaction, with one of his goals being to make Braintree’s employees feel that it was the best company they had ever worked for.

7.Making strategic acquisitions

In 2012, Braintree acquired Venmo for $26,2 million to prepare Braintree for the impending mobile commerce future. Venmo is a popular peer-to-peer payment service who at the time was processing about $10 million per month.

Venmo was a big part of what made Braintree so attractive to Paypal when it acquired the company just one year later.

In 2023, ten years after the acquisition, Venmo’s estimated annual revenue was $2,4 billion with an estimated annual payment volume of $298 billion.

11. What is Bryan currently working on?

Bryan is currently working on three different projects:

• Blueprint is a personal health optimization project, aiming to achieve and maintain peak health and longevity. This involves collaboration with top scientists and healthcare professionals to implement and test various health interventions.
  
  
• Kernel is focused on developing advanced brain-machine interface technology. The primary aim is to enhance human cognition and understand the brain better, potentially revolutionizing how we interact with technology and improving mental health diagnostics and treatments.
  
  
• The OS Fund is a venture capital fund that Johnson established to invest in scientist-entrepreneurs and companies working on deep tech innovations. The fund supports endeavors that aim to rewrite the operating systems of life, focusing on breakthrough technologies.

12. Recommended or used by Bryan

Three of Bryan’s favourites books* are:

• Man’s Search for Meaning by Viktor Frankl
• A Good Man by Mark Shriver
• Siddhartha by Herman Hesse

13. Connect with Bryan

Linkedin: https://www.linkedin.com/in/bryanrjohnson/

Twitter: https://twitter.com/bryan_johnson

Websites: https://www.bryanjohnson.com/