Peter Thiel, an institutional VC worth $2.5B, is investing in crypto businesses — in and of itself, that is enough to spark the community’s interest. But the larger-than-life persona of Thiel offers so much more. His actions and words entrance the media every time his name appears in connection to a new investment or donation. Once called “one of tech's most contrarian and successful investors” (Inc.com), the cofounder of PayPal and Palantir is reckless and ignorant to some, yet lauded as a rare genius of leadership by others.
What crypto startups has Thiel funded so far? How much Bitcoin does he hold and what are his predictions for the coin? What should crypto holders know about his investments and businesses, and his connection to president Donald Trump?
To dive straight into Thiel’s crypto investments, skip to the second half of this article. To learn about their context — his other companies, investments, and controversial ideology — read on from here.
Peter Andreas Thiel
At age 51, German-born American Peter Thiel has a net worth of $2.5 B and sits at nº40 on Forbes’ 2019 Midas List of Best Dealmakers In High-Tech Venture Capital. It all began with PayPal.
The Don of the PayPal Mafia
Peter Thiel and Max Levchin cofounded PayPal in 1998 based on an idea Levchin shared with Thiel over dinner: a startup to “create the new world currency” (Fortune). The company struggled to survive — ex PayPal colleague and YouTube cofounder Jawed Karim told Fortune that Thiel didn’t even know what credit card chargebacks were back then — before finally selling to eBay for $1.5B in 2002. By then, PayPal had amassed 20M users and burnt $180M in funding.
Many PayPal ex employees have gone on to found incredibly ambitious businesses, collectively adopting the cheeky moniker “The PayPal Mafia.” Members include Elon Musk (Tesla and SpaceX); Reid Hoffman (LinkedIn); Chad Hurley, Steve Chen, and Jawed Karim (YouTube); Jeremy Stoppelman and Russel Simmons (Yelp); and a half dozen other billionaires. Thiel, known lightheartedly as the don of the mafia, is seen above sitting on the left-hand side of the table in the foreground.
The so-called "PayPal Mafia".
Thiel’s enthusiasm for a currency that could circumvent centralized control is at least as old as PayPal. This, mixed with his conception of ‘spaces beyond the reach of politics,’ is likely what fuels his current interest in cryptocurrencies.
Thiel consistently contributes to tech companies at early stages of their development. Here are the most famous examples:
In 2004, Peter Thiel gave Facebook $500K, becoming the young company’s first outside investor. He reportedly earned nearly $1B by gradually selling most of his stake by 2018. He currently serves on the company’s board, though he considered leaving in 2018 due to intolerance he felt from other members towards his brand of libertarianism (Wall Street Journal).
Thiel cofounded the VC firm Founders Fund in 2005, and now owns an undisclosed percentage. The firm holds $2B under management and has invested in dozens of companies in the artificial intelligence, advanced computing, service, and energy sectors, including Elon Musk’s SpaceX, Airbnb, LinkedIn, Lyft, Spotify, and dozens more.
The Founders Fund has also invested in Bitcoin. More on this in the subsection “Thiel’s Most Notable Crypto Investments.”
Palantir Technologies is a CIA-backed, privately held big-data firm. The company was worth $20B in 2015 but has been reduced to $11B in 2019 according to Bloomberg. Thiel owns 12%. You can read more about Palantir’s worth and projection here.
Palantir provides private companies and government agencies with software to manage, secure and analyze large amounts of data. Clients include Credit Suisse Group AG (they create software that can detect dishonest employees who are attempting to steal bank assets) and the CIA, who allegedly uses Palantir’s software to track and identify terrorist suspects.
Thiel self identifies as a libertarian, and supported Trump’s presidential candidacy both vocally — he spoke at the 2016 Republican National Convention — and with ample donations: $1.25M for the campaign, plus a $250K contribution to the Trump Victory PAC.
Thiel’s connection to the Trump administration doesn’t end there; Trae Stephens, a VC at the Founders Fund and former employee at Palantir, was appointed to Trump’s defense transition team where he helped shape policy and vet Defense Department staff. Palantir won an $876M contract with the U.S. Defense Department in March 2017. That same month, left-wing journalism organization The Intercept reported that Palantir was the motor behind Trump's mass deportation of undocumented immigrants.
In a 2018 interview at the Economic Club of New York, Thiel said, “I thought supporting Trump was one of the least contrarian things I ever did. Half the country supported him.” In March 2018, Britain’s The Telegraph claimed that Thiel assured he has access to Donald Trump "anytime I want," though no source was cited.
Peter Thiel and Donald Trump.
In a 2009 essay about his ideological grounds (available here), Thiel writes that he “stand(s) against the inevitability of the death of every individual” (Thiel is currently literally trying to decelerate his aging through an experimental technique called parabiosis), “no longer believe(s) that freedom and democracy are compatible,” and that “the vast increase in welfare beneficiaries and the extension of the right to vote to women have rendered the notion of capitalist democracy into an oxymoron.”
The essay also states his views on politics as a general domain of society, which are key to understand his interest in cryptocurrencies and digital money in general: “I no longer believe that politics encompasses all possible futures of our world. In our time, the great task for libertarians is to find an escape from politics in all its forms — from the totalitarian and fundamentalist catastrophes to the unthinking demos that guides so-called “social democracy.”
PayPal was founded on the idea of “a web-based currency (that) would undermine government tax structures” (Fortune). It’s no surprise that, years later, Thiel would become interested in a budding currency invention capable of avoiding the nets of government, centralization, and politics altogether.
Thiel is undoubtedly controversial for his opinions, and famously left San Francisco for L.A. in 2018, claiming that “Silicon Valley is a one-party state,” while L.A. is “significantly more tolerant” (Forbes).
'Crypto Is Libertarian, A.I. Is Communist.'
During a public debate with Reid Hoffman (founder of LinkedIn, member of the PayPal Mafia), Thiel claimed “crypto is libertarian, AI is communist,” referring to the centralized nature of the latter.
He showed himself contrary to artificial intelligence because it relies on big data, gathered by massive entities like Google. Thiel compared this to the way communist regimes like the Soviet Union and Maoist China created highly centralized command economies. "The Chinese Communist Party hates crypto and loves AI," he said.
Controversy: Liberty or Big Data?
This view seems to clash with Thiel’s big-data firm Palantir, which, as mentioned above, sells data analysis software to the CIA. During the aforementioned debate with Hoffman, a live question from the audience prodded Thiel to explain how he squared his libertarian political beliefs with support for mass government surveillance. This question was visible to viewers but was never addressed.
On Mar. 15, 2018 (watch here), Thiel spoke at the Economic Club of New York. He said he is “not sure of how good of an investment blockchain is, but cryptos, as a store of value, may have quite a long way to go.” In this respect, Thiel is most supportive of Bitcoin, and has claimed it has the best chance to become akin to gold. “It’s too cumbersome to use for day to day payments, but it could replace gold. They’re similar (…) not backed by any government, not clear what its intrinsic value is.”
In mid 2017, when most mainstream investors were too wary to come anywhere near crypto, partners of Thiel’s Founders Fund began buying what would amount to $15M–$20M worth of Bitcoin (by January 2018 prices, as reported by the Wall Street Journal). The Founders Fund allegedly pitched Bitcoin to their investors as “a high-risk, high-reward wager similar to its other venture bets” (Fortune).
In March, Thiel said he was “long bitcoin” and highlighted its possibility of becoming a gold-like safe-haven investment. The billionaire backed the idea of bitcoin becoming a store of value instead of a currency for daily transactions.
As far as is publicly known, the Founders Fund invested in Bitcoin between mid 2017 and mid 2018. It is not publicly disclosed how Thiel’s investment may have faired with the 2018 bear market. At the time of writing Bitcoin still dominates the cryptocurrency market cap with $93,590,608,728 and is valued at $5,301. As of March 2019, Ethereum supports 2,447 dapps with 17,930 daily dapp users.
In August 2018, Thiel was among other billionaires who invested in the year-long Block.one ICO, which raised $4B in total setting ICO records for that time (Wall Street Journal). Block.one is an open source software publisher. Its first and main project is the EOS blockchain, which launched in June 2018.
Despite facing some controversy over its delegated-proof-of-stake system (it was said it would encourage network centralization), the eccentricity of its frontmen (advisor Brock Pierce was heavily criticized on HBO’s Last Week Tonight and subsequently let go by the company), and a report by the Wall Street Journal calling Block.one “a software startup that doesn’t plan to sell any software,” EOS has been successful as a cryptocurrency.
At the time of writing EOS is the sixth largest coin by market cap ($4,963,782,774), valued at $5.48 per coin. EOS moves a daily volume of $1,983,652,041. There are currently 945510 accounts on the EOS blockchain and 256 dapps.
Ethereum and more: the Thiel Fellowship
Every year, the Thiel Foundation donates $100K scholarships to college-aged entrepreneurs to drop out and pursue their business plans for two years.
Recipients in 2018 included Vest co-founder Axel Ericsson, Polkadot co-founder Robert Habermeier, MyCrypto CTO Daniel Ternyak and Mechanism Labs co-founder Aparna Krishnan. Most notably, Vitalik Buterin received the Thiel Fellowship in 2014, which he used to fund Ethereum.
Ethereum is in a constant tug of war with Ripple (XRP) over the second place in cryptocurrency market cap; at press time however, Buterin’s coin is winning. With a market cap of $18,296,724,224, 391,451 active user accounts, and valued at $173, Ethereum still stands as the silver to Bitcoin’s gold.
Thiel backed a $2.1M seed round for startup Layer1, a crypto investment and engineering platform, in December 2018. Layer1 is in itself a crypto business fund. It takes in promising blockchain protocols and builds the tech they need to operate, focusing on programmable money and store-of-value applications.
Layer1 backed Grin coin, a censorship-resistant, anonymous cryptocurrency designed to test the MimbleWimble protocol for Bitcoin, in December 2018. Grin coin launched in January 2019. It has a market cap of $23,135,825 and is valued at $2.86 per token.
Tagomi Systems Inc.
In May 2018, Thiel invested in Tagomi Systems Inc., a broker-dealer that seeks to optimize bulk bitcoin trading orders for high-value clients. Tagomi recently received approval to do business in New York on a BitLicense from the Department of Financial Services (Forbes), which will allow it to buy and sell virtual currency for customers in New York.
In total, Tagomi raised $27.5M from Paradigm, Pantera Capital, and the Founders Fund.
In the past, Thiel has advocated for "steelmanning" — the opposite of strawmanning, i.e. trying to understand the strongest version of your opponents' views. "There's always a tendency for us to reduce the other side to a caricature of itself," he said in his debate with Hoffman (Inc.com).
It is interesting to apply this method on Thiel’s own views regarding crypto. Is Bitcoin a wise long investment? Will cryptocurrencies devolve in the depolitization of society? And, is that something we want?
Regardless of his more controversial opinions, Thiel has a track record of spotting future successful businesses when nobody else is looking. Perhaps he has spotted something in crypto that we haven’t seen yet?
As always, thanks for reading,
The Coin360 Editorial Team