Grand Ambitions
Thiel had grand ambitions for the company. ``PayPal was the new currency for the world economy,'' he says. Like many young dot- commers, he believed the Internet would empower the individual. For Thiel, PayPal was all about freedom: It would enable people to s***t currency controls and move money around the globe.
Before Thiel could change the world, however, he had to guide PayPal through life-threatening challenges. Russian hackers were stealing millions from the company. Credit card companies were claiming PayPal was violating their rules. By early 2000, PayPal had only enough money to stay afloat for eight weeks and was losing more than $10 million a month, according to Luke Nosek, a former PayPaldirector of strategy.
That March, as the Nasdaq Composite Index roared its way to a record 5,048, Thiel set out to raise money from venture capital investors. Dot-com fever was running high, and VCs valued the money-losing PayPal at $500 million.
``Everyone thought that wasn't high enough,'' Sacks says.
Nasdaq Bust
Everyone except Thiel. He looked at the Nasdaq frenzy and concluded the dot-com bubble was about to pop. He seized his opportunity. Based on the $500 million valuation, Thiel raised $100 million, more than his colleagues had planned, and closed the deal in three weeks, on March 31, 2000.
He was just in time. The next day, the Nasdaq began a plunge that would eventually send it tumbling 67 percent in 18 months.
``If he hadn't made that call, the company wouldn't be around today,'' Howery says of Thiel.
By mid-2001, Thiel had positioned the company as the pre- eminent Web payment service and was contemplating an initial public offering. He registered for the IPO just weeks after the terrorist attacks in New York and Washington.
The day PayPal stock began trading, Feb. 15, 2002, the shares soared 55 percent. Out in the parking lot of PayPal's Palo Alto offices, Thiel and his crew celebrated by doing ``keg stands.'' That's when you're held upside down over a running beer keg and chug as much of the flowing brew as you can. Thiel raced around playing 10 games of speed chess simultaneously. He won all but one, against his Stanford buddy Sacks. Thiel, who says he hates to lose at anything, swept the pieces off the board.
``Peter smashed the pieces,'' Sacks recalls. Thiel doesn't apologize for his competitive streak. When someone calls him a bad loser, he replies, ``Show me a good loser, and I'll show you a loser.''
EBay Comes Knocking
Thiel won big with PayPal. Eight months later, in October 2002, EBay agreed to buy the company for $1.5 billion.
The PayPal crew cashed-in and moved on. Chad Hurley, Steve Chen and Jawed Karim founded video-sharing Web site YouTube Inc. and sold it to Google Inc. in October for $1.65 billion. Levchin went off and founded Slide, a photo-sharing site.
Executive Vice President Reid Hoffman founded Linked-In Corp., a business networking site. Vice President Jeremy Stoppelman created Yelp, a site that helps people find restaurants, shops and other businesses in their area. And Thiel went back to hedge funds and founded Clarium.
PayPal Veterans
Thiel has invested in several of his former employees' startups through a $50 million venture capital firm, the Founders Fund, which is run by Howery and Nosek. Thiel says he regrets not having invested in YouTube. ``It kind of fell through the cracks,'' he says. Thiel has high hopes for Facebook, however. ``It is the largest independent Web 2.0 company,'' says Thiel, who's one of three Facebook board members.
Mark Zuckerberg, who founded Facebook with zero business experience, calls Thiel a mentor. ``He helped shape the way I think about the business,'' Zuckerberg, 22, says. When Thiel backed the startup in 2004, he told Zuckerberg to move to Silicon Valley. Zuckerberg dropped out of Harvard and did just that. If Facebook one day pulls off a deal like YouTube's, Thiel would pocket about $100 million.
On a cloudy September afternoon, Thiel is picking at a chicken pesto salad in his 32nd-floor apartment on the Upper East Side of New York, explaining his plan for Clarium.
``Our long-term goal is to rehabilitate the more classical approach to qualitative investing,'' Thiel says. ``Nowadays, people think everything is mathematical or that everything is just noise and random. There is no in-between space.''
Thiel had grand ambitions for the company. ``PayPal was the new currency for the world economy,'' he says. Like many young dot- commers, he believed the Internet would empower the individual. For Thiel, PayPal was all about freedom: It would enable people to s***t currency controls and move money around the globe.
Before Thiel could change the world, however, he had to guide PayPal through life-threatening challenges. Russian hackers were stealing millions from the company. Credit card companies were claiming PayPal was violating their rules. By early 2000, PayPal had only enough money to stay afloat for eight weeks and was losing more than $10 million a month, according to Luke Nosek, a former PayPaldirector of strategy.
That March, as the Nasdaq Composite Index roared its way to a record 5,048, Thiel set out to raise money from venture capital investors. Dot-com fever was running high, and VCs valued the money-losing PayPal at $500 million.
``Everyone thought that wasn't high enough,'' Sacks says.
Nasdaq Bust
Everyone except Thiel. He looked at the Nasdaq frenzy and concluded the dot-com bubble was about to pop. He seized his opportunity. Based on the $500 million valuation, Thiel raised $100 million, more than his colleagues had planned, and closed the deal in three weeks, on March 31, 2000.
He was just in time. The next day, the Nasdaq began a plunge that would eventually send it tumbling 67 percent in 18 months.
``If he hadn't made that call, the company wouldn't be around today,'' Howery says of Thiel.
By mid-2001, Thiel had positioned the company as the pre- eminent Web payment service and was contemplating an initial public offering. He registered for the IPO just weeks after the terrorist attacks in New York and Washington.
The day PayPal stock began trading, Feb. 15, 2002, the shares soared 55 percent. Out in the parking lot of PayPal's Palo Alto offices, Thiel and his crew celebrated by doing ``keg stands.'' That's when you're held upside down over a running beer keg and chug as much of the flowing brew as you can. Thiel raced around playing 10 games of speed chess simultaneously. He won all but one, against his Stanford buddy Sacks. Thiel, who says he hates to lose at anything, swept the pieces off the board.
``Peter smashed the pieces,'' Sacks recalls. Thiel doesn't apologize for his competitive streak. When someone calls him a bad loser, he replies, ``Show me a good loser, and I'll show you a loser.''
EBay Comes Knocking
Thiel won big with PayPal. Eight months later, in October 2002, EBay agreed to buy the company for $1.5 billion.
The PayPal crew cashed-in and moved on. Chad Hurley, Steve Chen and Jawed Karim founded video-sharing Web site YouTube Inc. and sold it to Google Inc. in October for $1.65 billion. Levchin went off and founded Slide, a photo-sharing site.
Executive Vice President Reid Hoffman founded Linked-In Corp., a business networking site. Vice President Jeremy Stoppelman created Yelp, a site that helps people find restaurants, shops and other businesses in their area. And Thiel went back to hedge funds and founded Clarium.
PayPal Veterans
Thiel has invested in several of his former employees' startups through a $50 million venture capital firm, the Founders Fund, which is run by Howery and Nosek. Thiel says he regrets not having invested in YouTube. ``It kind of fell through the cracks,'' he says. Thiel has high hopes for Facebook, however. ``It is the largest independent Web 2.0 company,'' says Thiel, who's one of three Facebook board members.
Mark Zuckerberg, who founded Facebook with zero business experience, calls Thiel a mentor. ``He helped shape the way I think about the business,'' Zuckerberg, 22, says. When Thiel backed the startup in 2004, he told Zuckerberg to move to Silicon Valley. Zuckerberg dropped out of Harvard and did just that. If Facebook one day pulls off a deal like YouTube's, Thiel would pocket about $100 million.
On a cloudy September afternoon, Thiel is picking at a chicken pesto salad in his 32nd-floor apartment on the Upper East Side of New York, explaining his plan for Clarium.
``Our long-term goal is to rehabilitate the more classical approach to qualitative investing,'' Thiel says. ``Nowadays, people think everything is mathematical or that everything is just noise and random. There is no in-between space.''


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