But fifteen years later his experiences at PayPal make it hard for him to stomach investments in the payments space, Hoffman told CNBC's Jon Fortt in an interview that aired Thursday on "Squawk Alley" and "Fortt Knox."
Remembering all of the ways that PayPal "almost died" has given Hoffman a checklist of "minefields" for start-ups to avoid, he said. That list is so hard to clear that he's yet to make a single payments investment during his eight-year tenure as a partner at venture firm Greylock Partners.
"I didn't invest in Square, which was obviously a mistake," he said. "I didn't invest in Stripe, which was obviously a mistake. Great founders, great, interesting companies — it was just my own PTSD from PayPal."
PayPal's dramatic tale is now part of Silicon Valley lore. It was a story of boom and bust and ultimately a big sale that featured some of the biggest personalities in tech, including investor Peter Thiel, Tesla's Elon Musk and YouTube founders Chad Hurley, Steve Chen, and Jawed Karim. Others in the "PayPal Mafia," include Yammer founder David Sacks, Yelp's Jeremy Stoppelman and Affirm's Max Levchin.
For the most part, they've avoided touching payments start-ups.
"Getting them established is really hard," Hoffman said. "You have to get a minimum of a billion dollars of transactions to even have an interesting payments business."
And there are plenty of other risks.
"People don't want the payments thing to screw up," he said. "They don't want to go with start-ups, they want to go with what's tried and true."
Square, co-founded by Jack Dorsey, has bucked the trend. The stock has more than doubled over the past year, and the company is valued at over $9 billion. Stripe was similarly valued at $9 billion in a private funding round last year.
Not that Hoffman hasn't made plenty of money elsewhere. He's worth more than $3 billion, according to wealth trackers at Bloomberg and Forbes, mostly from his stake in LinkedIn, which Microsoft bought last year for more than $26 billion.