Peter Thiel: The Strategist Behind the Investment Empire

Looking back at the history of Silicon Valley, the name Peter Thiel appears repeatedly. On January 20, 2025, among the influential figures in the tech industry gathered at the core of Washington power, he did not appear, yet he was present everywhere, as if pulling strings like a puppeteer. Vice President, AI policy maker, Meta founder, and Tesla CEO—all are part of Thiel’s network. At the center of this phenomenon is an organization called Founders Fund. Started in 2005 as a small $50 million fund, this investment firm has now grown to become the most influential and simultaneously most controversial entity in Silicon Valley.

The PayPal Era: The Prelude to Power Games

Peter Thiel’s career as an investor truly began with his involvement in PayPal. In 1998, Ken Howery, a young man contributing to Stanford’s conservative student magazine Stanford Review, was captivated by the young Thiel. According to Howery’s recollection, their first dinner was less of a job interview and more of a philosophical journey. Impressed by Thiel’s breadth and depth of knowledge and his unique perspective, Howery told his partner that night, “I think I’ll probably work with this person for the rest of my life.”

Soon, Howery and Thiel collaborated with Luke Nosek, an entrepreneur developing a smart calendar app, who was participating in a Stanford lecture. An episode where Nosek once forgot Thiel’s face hints at the essence of the entrepreneurs Thiel seeks: talented, independent thinkers who do not rely on conventional wisdom.

In 1999, Thiel decided to invest in cryptographic technology developed by Ukrainian-born genius entrepreneur Max Levchin. This $240,000 investment ultimately yielded a $60 million return. However, during this process, Thiel experienced a serious conflict with one of Silicon Valley’s most important rivals—Michael Moritz of Sequoia Capital.

By March 2000, when PayPal announced a $100 million Series C funding, Thiel had already foreseen an impending economic crisis. His prediction proved accurate. A few days later, the dot-com bubble burst, shaking the entire industry. But Thiel didn’t just complete the fundraising; he proposed a bolder move: reallocating some of the newly acquired funds into Thiel Capital International and shorting the market.

Moritz was furious. A Sequoia director warned, “If the board approves this proposal, I will resign.” The fundamental divergence was here. Moritz was the archetype of an investor wanting to “do the right thing,” while Thiel was a thinker with a philosophical ambition to “become the right person.” Later, regretful, an investor reflected, “If I had shorted then, I would have made returns exceeding PayPal’s entire operating profit.”

In September of that year, Thiel, Levchin, and Scott Bannister staged a coup, ousting CEO Elon Musk. Moritz declared that Thiel’s appointment as CEO would be only provisional. This humiliating condition fostered deep resentment in Thiel and eventually motivated him to build an independent investment empire—Founders Fund.

From Clarium Capital: Building a Systematic Strategy

When PayPal was acquired for $150 million, Thiel’s ambitions in investing intensified. Recognizing that his strength lies in strategy, not execution, Thiel and Howery devised a plan to transform their sporadic angel investments into a systematic venture capital practice.

In 2002, Thiel established Clarium Capital, a macro hedge fund. He was adept at grasping civilization-level trends and instinctively resisting mainstream consensus. This thinking quickly proved its power in the market. Clarium’s assets skyrocketed from $10 million in three years to $1.1 billion, and in 2003, it achieved a 65.6% profit from shorting the dollar.

Simultaneously, Thiel and Howery prepared to shift into venture investing. In 2004, they decided to establish a $50 million initial fund, Clarium Ventures (later renamed Founders Fund). External fundraising was difficult; major institutional investors (LPs) showed little interest in this unconventional venture fund. Ultimately, Thiel personally contributed $38 million (76% of the fund’s size) to cover the shortfall. Howery recalls, “Basically, Peter provided the capital, and I provided the effort.”

Precision in Early Investments: Betting on Palantir and Facebook

One reason for Founders Fund’s success is Thiel’s strategic early investments before raising capital.

Palantir exemplifies Thiel’s political and strategic thinking. Founded in 2003, it aimed to apply PayPal’s anti-fraud technology to provide data analysis tools to government agencies. Most venture investors doubted the slow government procurement process, and even Moritz at Sequoia was indifferent. However, In-Q-Tel, under the CIA, invested an initial $2 million, gradually earning trust. By December 2024, Founders Fund’s total invested amount was $165 million, with a stake worth over $3.05 billion—an 18.5x return.

Facebook was even more dramatic. In summer 2004, Reid Hoffman introduced Mark Zuckerberg (then 19) to Thiel. Thiel and Hoffman met Zuckerberg at the Clarium office in Presidio, San Francisco. The young man, dressed in a T-shirt and Adidas sandals, embodied the “entrepreneurial trait liberated from imitation competition” that Thiel later praised in his book Zero to One.

Thiel decided to invest $500,000 in convertible notes. The terms were simple: if by December 2004 the user base reached 1.5 million, the notes would convert into equity, giving Thiel 10.2% of the company. Later, Thiel regretted missing the Series B round—initial valuation at $5 million, but within eight months, the valuation soared to $85 million, and in Series C, it reached $525 million. From this “failure,” Thiel learned an counterintuitive lesson: “When smart investors drive rapid valuation increases, they are often underestimated. People always underestimate the speed of change.”

Ultimately, Founders Fund invested a total of $8 million in Facebook, generating a $365 million return for LPs—46.6 times.

Thiel’s Investment Philosophy: Merging Macro Vision and Venture

The conflict between Thiel and Moritz was not just personal but symbolized fundamental differences in investment philosophy. Moritz later evaluated Thiel as “coming from a hedge fund background, always wanting to cash out and exit.” This is an accurate critique. Thiel’s core thinking focuses on reading large macro trends and foreseeing situations 20 steps ahead, rather than short-term profits.

Founders Fund institutionalized this philosophy. Its concentrated investments in SpaceX, Bitcoin, Stripe, and Airbnb are not mere luck but based on Thiel’s unique theory that all successful companies are different—they solve problems to gain monopolistic positions.

The three fund vintages of 2007, 2010, and 2011 set records in venture capital history. With initial capital of $227 million, $250 million, and $625 million respectively, they achieved returns of 26.5x, 15.2x, and 15x.

Thiel’s Leadership: The Power of Ideas Attracts Capital

Thiel’s greatest weapon is his unique thinking and expressive power. He is one of the few individuals capable of seamlessly combining knowledge from ancient philosophy to Ted Kaczynski, and articulating a distinctive discourse on entrepreneurship and monopoly.

Many talented entrepreneurs and fund managers have radically changed their careers working under Thiel. Howery abandoned a high-paying job at Barings Bank; Nosek gave up his startup ambitions. This is not just charisma but stems from Thiel’s ability to clearly communicate complex ideas and demonstrate new possibilities beyond conventional management.

The growth of Founders Fund is not merely about investment returns but a process where the “strategic genius” Peter Thiel consolidates financial capital and talented individuals, reshaping Silicon Valley’s power structure itself. His “retributive” founding of Founders Fund ultimately redefined the venture capital industry and America’s political influence.