Friday, February 21, 2014

Peter Thiel

Peter Andreas Thiel (/tl/German: [ˈpeːtɐ̯ anˈdʀeas tiːl]; born October 11, 1967)[1] is a German-born[4] American entrepreneur,venture capitalist, and hedge fund manager. Thiel cofounded PayPal with Max Levchin, and later, Elon Musk, and served as its CEO. He also cofounded Palantir, of which he is chairman. He serves as president of Clarium Capital, a global macrohedge fund with $700 million in assets under management; a managing partner in Founders Fund, a $275 million venture capital fund that he launched with Ken Howery and Luke Nosek in 2005; and cofounder and investment committee chair of Mithril Capital Management.[5][6] He was the first outside investor in Facebook, the popular social-networking site, with a 10.2% stake acquired in 2004 for $500,000, and sits on the company's board of directors. Thiel was ranked #293 on theForbes 400 in 2011, with a net worth of $1.5 billion as of March 2012.[2] Thiel lives in San FranciscoCalifornia.[7]
Born to German parents in Frankfurt am MainWest Germany, Thiel moved to the United States with his parents when he was a toddler, and was raised in Foster City, California.[8] Thiel was a US-rated Chess Master and one of the highest ranked under-21 players in the country.
Thiel studied 20th-century philosophy as an undergraduate at Stanford University. He received his B.A. in Philosophy from Stanford in 1989 and acquired a J.D. fromStanford Law School in 1992.[9]
An avowed libertarian, he founded The Stanford Review in 1987 along with Norman Book. The Stanford Review became famous for challenging campus mores includingpolitical correctness and laws against hate speech. The Stanford Review is now the university's main conservative/libertarian newspaper.
Thiel formed friendships with other students at Stanford, many of whom contributed to the Stanford Review. These include Keith RaboisDavid O. Sacks, and Reid Hoffman. Some of these friends later took up jobs at PayPal (co-founded by Thiel) and became part of the PayPal Mafia.
While studying at Stanford, Thiel also encountered René Girard, whose mimetic theory influenced him.

Early career[edit]

Thiel clerked for Judge J.L. Edmondson of the United States Court of Appeals for the 11th Circuit.[citation needed] From 1993 to 1996, he traded derivatives for Credit Suisse Group.[10] He founded Thiel Capital Management, a multistrategy fund, in 1996.

PayPal[edit]

In 1998 Thiel co-founded PayPal, an online payments system, with Max Levchin. The company later merged with X.com, then headed by Elon Musk. PayPal went public on February 15, 2002, and was sold to eBay for $1.5 billion later that year.[11] Thiel's 3.7 percent stake in PayPal was worth approximately $55 million at the time of the acquisition.[12]
According to Eric Jackson's account of PayPal in his book The PayPal Wars, Thiel viewed PayPal's mission as liberating people throughout the world from the erosion of the value of their currencies due to inflation. Jackson recalls an inspirational speech by Thiel in 1999:
"We're definitely onto something big. The need PayPal answers is monumental. Everyone in the world needs money – to get paid, to trade, to live. Paper money is an ancient technology and an inconvenient means of payment. You can run out of it. It wears out. It can get lost or stolen. In the twenty-first century, people need a form of money that's more convenient and secure, something that can be accessed from anywhere with a PDA or an Internet connection. Of course, what we're calling 'convenient' for American users will be revolutionary for the developing world. Many of these countries' governments play fast and loose with their currencies," the former derivatives trader [referring to Thiel] noted, before continuing, "They use inflation and sometimes wholesale currency devaluations, like we saw in Russia and several Southeast Asian countries last year [referring to the 1998 Russian financial crisis and 1997 Asian financial crisis], to take wealth away from their citizens. Most of the ordinary people there never have an opportunity to open an offshore account or to get their hands on more than a few bills of a stable currency like U.S. dollars. Eventually PayPal will be able to change this. In the future, when we make our service available outside the U.S. and as Internet penetration continues to expand to all economic tiers of people, PayPal will give citizens worldwide more direct control over their currencies than they ever had before. It will be nearly impossible for corrupt governments to steal wealth from their people through their old means because if they try the people will switch to dollars or Pounds or Yen, in effect dumping the worthless local currency for something more secure."[13]

Clarium Capital[edit]

Immediately after selling PayPal, Thiel launched a global macro hedge fund, Clarium Capital, pursuing a global macro strategy. In 2005 Clarium was honored as global macro fund of the year by both MarHedge and Absolute Return, two trade magazines. Thiel’s approach to investing became the subject of a chapter in Steve Drobny’s book, Inside the House of Money. Thiel successfully bet that the U.S. dollar would weaken in 2003, and gained significant returns betting that the dollar and energy would rally in 2005. After significant losses starting in 2009, Clarium dropped from $7 billion in assets in 2008 to around $350 million in 2011.[14]
In 2004, well before the financial crisis of 2007–2010 bore him out in general terms, Thiel spoke of the dot-com bubble of 2000 having migrated, in effect, into a growing bubble in the financial sector. He specified General Electric, with its large financing arm, and WalMart as vulnerable. To illustrate, in 2004, he reported having backed away from buying Martha Stewart's Manhattan duplex for $7 million in the winter of 2003-2004.[10] While the apartment did sell in 2004 for $6.65 million to another buyer, it was on the market but unsold in early 2010 at $15.9 million,[15] and later at the reduced price of $13.9 million.[16]

Facebook[edit]

In August 2004, Thiel made a $500,000 angel investment in the social network Facebook for 10.2% of the company and joined Facebook's board. This was the first outside investment in Facebook,[3][17] and Thiel went on to be portrayed in The Social Network (2010) by actor Wallace Langham.
In his book The Facebook Effect, David Kirkpatrick outlines the story of how Thiel came to make his investment: former Napster and Plaxo employee Sean Parker, who at the time had assumed the title of "President" of Facebook, was seeking investors for Facebook. Parker approached Reid Hoffman, the CEO of work-based social networkLinkedIn. Hoffman liked Facebook but declined to be the lead investor because of the potential for conflict of interest with his duties as LinkedIn CEO. He redirected Parker to Thiel, whom he knew from their PayPal days (both Hoffman and Thiel are considered members of the PayPal Mafia). Thiel met Parker and Mark Zuckerberg, the Harvard college student who had founded Facebook and controlled it. Thiel and Zuckerberg got along well and Thiel agreed to lead Facebook's seed round with $500,000 for 10.2% of the company. Hoffman and Mark Pincus also participated in the round. The investment was originally in the form of a convertible note, to be converted to equity if Facebook reached 1.5 million users by the end of 2004. Although Facebook narrowly missed the target, Thiel allowed the loan to be converted to equity anyway.[18] Thiel said of his investment:
"I was comfortable with them pursuing their original vision. And it was a very reasonable valuation. I thought it was going to be a pretty safe investment."[18]
As a board member, Thiel was not actively involved in Facebook's day-to-day decision making. According to Sarah Lacy, Thiel's main advice to Zuckerberg in their initial years was "Just don’t fuck it up."[19] However, he did provide help with timing the various rounds of funding. Zuckerberg credited Thiel with helping him time Facebook's 2007 Series D to close before the 2007–2010 financial crisis.[20]
In September 2010, Thiel, while expressing skepticism about the potential for growth in the consumer Internet sector, argued that relative to other Internet companies, Facebook (which then had a secondary market valuation of $30 billion) was comparatively undervalued.[21] Facebook's IPO was in May 2012, with a market cap of nearly $100 billion ($38 a share), at which time Thiel sold 16.8 million shares for $638 million.[22] In August 2012, immediately upon the conclusion of the early investor lock out period, Thiel sold almost all of his remaining stake for between $19.27 and $20.69 per share, or $395.8 million, for a total of more than $1 billion.[22][23] He still retained 5 million shares and a seat on the board of directors.[24]

Angel investor and venture capitalist[edit]

In 2005 Thiel created Founders Fund, a San Francisco based venture capital fund. Other partners in the fund include Sean ParkerKen Howery, and Luke Nosek.
In addition to Facebook, Thiel has made early-stage investments in numerous startups (personally or through his venture capital fund), including BooktrackSlide,LinkedInFriendsterRapleafGeni.comYammerYelp, Inc.PowersetPractice FusionMetaMedVatorPalantir TechnologiesIronPortVotizenAsanaBig Think, Caplinked, QuoraRyppleTransferWise, Stripe, and Legendary Entertainment. Slide, LinkedIn, Geni.com, and Yammer were founded by Thiel's former colleagues at PayPal, Slide by Levchin, Linkedin by Reid Hoffman, Yelp by Jeremy Stoppelman, Geni.com and Yammer by David Sacks, and Xero by Rod Drury. Fortune magazine reports that PayPal alumni have founded or invested in dozens of startups with an aggregate value of around $30 billion. In Silicon Valley circles, Thiel is colloquially referred to as the "Don of the PayPal Mafia", as noted in the Fortune magazine article.[25] Thiel's views on management are highly regarded, especially his famous observation that start-up success is highly correlated with low CEO pay.
Thiel founded Palantir Technologies funded by the CIA's venture capital arm In-Q-Tel.[26]
In February 2013, Thiel received a TechCrunch Crunchie Award for Venture Capitalist of the year.[27]

Mithril: a late-stage investment fund[edit]

In June 2012, Peter Thiel launched Mithril, a late-stage investment fund with $402 million at the time of launch, intended for companies that were at the cusp between being private and going public.[5][6] Other partners in the fund include Jim O'Neill, co-founder of the Thiel Fellowship, and Ajay Royan, a former managing director atClarium Capital, a hedge fund started by Thiel.

Philanthropy[edit]

Thiel carries out most of his philanthropic activities through a nonprofit foundation created by him called the Thiel Foundation.[28]

Theory of philanthropy[edit]

Thiel concentrates the bulk of his philanthropic efforts on what he sees as potential breakthrough technologies. In November 2010, Thiel organized a Breakthrough Philanthropy conference that showcased eight nonprofits that he believed were working on radical new ideas in technology, government, and human affairs.[29] A similar conference was organized in December 2011 with the name "Fast Forward".[30]

Machine Intelligence Research Institute[edit]

Thiel believes in the importance and desirability of a technological singularity.[31] In February 2006, Thiel provided $100,000 of matching funds to back the Singularity Challenge donation drive of the Machine Intelligence Research Institute (then known as the Singularity Institute for Artificial Intelligence). Additionally, he joined the Institute's advisory board and participated in the May 2006 Singularity Summit at Stanford as well as at the 2011 Summit held in New York City.
In May 2007, Thiel provided half of the $400,000 matching funds for the annual Singularity Challenge donation drive.
The organization was a participant in the Breakthrough Philanthropy conference (November 2010) and the Fast Forward conference (December 2011).

Anti-aging research[edit]

In September 2006, Thiel announced that he would donate $3.5 million to foster anti-aging research through the Methuselah Mouse Prize foundation.[32] He gave the following reasons for his pledge: "Rapid advances in biological science foretell of a treasure trove of discoveries this century, including dramatically improved health and longevity for all. I’m backing Dr. [Aubrey] de Grey, because I believe that his revolutionary approach to aging research will accelerate this process, allowing many people alive today to enjoy radically longer and healthier lives for themselves and their loved ones."
The Thiel Foundation supports the research of the SENS Foundation, headed by Dr. de Grey, that is working to achieve the reversal of biological aging. The Thiel Foundation also supports the work of anti-aging researcher Cynthia Kenyon.
The SENS Foundation was a participant in the Breakthrough Philanthropy conference (November 2010) and the Fast Forward conference (December 2011).

Seasteading[edit]

On April 15, 2008, Thiel pledged $500,000 to the new Seasteading Institute, directed by Patri Friedman, whose mission is "to establish permanent, autonomous ocean communities to enable experimentation and innovation with diverse social, political, and legal systems".[33] This was followed in February 2010 by a subsequent grant of $250,000, and an additional $100,000 in matching funds.[34]
In a talk at the Seasteading Institute conference in November 2009, Thiel explained why he believed that seasteading was necessary for the future of humanity.[35]
In 2011 Thiel was reported as having given a total of $1.25 million to the Seasteading Institute.[36] According to the Daily Mail Peter Thiel was inspired to do so by Ayn Rand's philosophical novel Atlas Shrugged.[37]
The Seasteading Institute was a participant in the Breakthrough Philanthropy conference (November 2010) and the Fast Forward conference (December 2011).

Thiel Fellowship[edit]

On September 29, 2010, Thiel said he had created a new fellowship called the Thiel Fellowship, which will award $100,000 to 20 people under 20 years old,[38] in order to spur them to quit college and create their own ventures.[39]

Breakout Labs[edit]

In October 2011, the Thiel Foundation announced the creation of Breakout Labs, a grant-making program intended to fund early-stage scientific research that may be too radical or innovative for traditional scientific funding bodies but also too long-term and speculative for venture investors.[40] In April 2012, Breakout Labs announced its first set of grantees.[41]

Other causes[edit]

The Thiel Foundation is also a supporter of the Committee to Protect Journalists, which promotes the right of journalists to report the news freely without fear of reprisal,[42] and the Human Rights Foundation, which organizes the Oslo Freedom Forum.[43]
He is also a supporter of the life extension group the Methuselah Foundation, founded by Aubrey De Grey.[44]