Class of 2020 | cohenjas@wharton.upenn.edu
Often in business, being contrarian is the way to get ahead. Few do it better than Peter Thiel, which is why he is one of the most successful individuals Silicon Valley has ever produced. However, Thiel surprised many people this this October when he made perhaps the most contrarian move possible; he donated to Donald Trump’s presidential run. Now, just a month later, Thiel is part of Trump’s presidential transition team and he will be largely responsible for helping to shape the new administration’s policy towards Silicon Valley and the tech sector.
So how did Thiel blaze a path from entering the U.S. as a young German immigrant to being a multi-billionaire shaping government policy? For starters, he’s really smart. Several years after graduating Stanford, Thiel founded a small online payments platform that merged with Elon Musk’s X.com before being sold to eBay for $1.5 billion. His 3.7% stake netted him $55 million. A couple of years later, Thiel decided to use some of this money to become the first outside investor in Facebook, putting in $500,000 for a 10.2% stake in the company. Over the next several years, Thiel helped Zuckerberg time his funding rounds and, by the time Facebook went through its IPO in 2012, Thiel was able to sell most of his shares for over $1 billion. He still has 5 million shares and sits on the board.
At the same time, Thiel was running his new venture fund, Founders Fund, started in 2005 with some friends. Founders Fund now is invested in dozens of early-stage startups with an aggregate value of over $30 billion. These startups include Spotify, SpaceX, AirBnB, Lyft, and more. Simultaneously, Thiel founded Palantir Technologies which specializes in big data analysis. And last year Thiel joined Y Combinator, perhaps the most successful seed accelerator in Silicon Valley, as a partner.
So what is Thiel doing on Trump’s transition team? Silicon Valley, for the most part, sees a Trump presidency as a threat. Trump wants tech companies such as Apple to move their labor force into the United States. Trump’s stance on immigration is largely at odds with the tech community. Even with Thiel’s donation, Silicon Valley donated 60 times more to Clinton’s campaign. With all of this in mind, Thiel seems like the only Trump supporter in Silicon Valley with enough influence and experience to be taken seriously. So now the fate of Silicon Valley and, to a large extent, the VC space, rests in the hands of a 49-year-old self-made billionaire from Germany.
What will Thiel be talking to Trump about? For starters, he identifies as a Libertarian, often speaking out against government overspending and overregulation, such as with net neutrality. In an industry that thrives with less regulation, Thiel may be a blessing because he actively speaks out against overwhelming government oversight. Additionally, Thiel will be arguing on behalf of the venture capital community against carried interest being changed to an ordinary income tax. This is critical because if VCs lose their carried interest incentives, many believe that they will no longer be incentivized to prioritize the long term gains of their startups over short term profit. Both the Clinton and Trump campaigns were largely supportive of the removal of carried interest, but now that Trump is president-elect, many feel that he can be convinced to carry on with the status-quo.
Peter Thiel’s job over the next two months is critical for the future of both Silicon Valley tech startups and VCs across the country. Thiel has years of experience and a vested interest in the success of both spaces, and he knows that their successes are intertwined. If VC is less lucrative, or if Silicon Valley becomes more regulated, the boom of successes over the past decade will slow dramatically. However, if Trump, at the very least, maintains the status quo, America’s booming tech industry will continue to thrive and everyone will have Peter Thiel, the contrarian, Trump-supporting pariah, to thank.