One of the most enigmatic figures in Silicon Valley’s investment world, Peter Thiel. Following his path reveals not just a story of an investor’s success, but a reshuffling of the power structure itself.

In the late 1990s, the relationship that began with a conservative student magazine at Stanford University later grew into an empire that would shake Silicon Valley. From Thiel’s meeting with Ken Howery to Luke Nosek’s involvement, the core members of the PayPal Mafia gradually came together.

During the PayPal era, Thiel experienced a clash with Michael Moritz. When he proposed short selling based on macroeconomic foresight, he was blocked by Moritz’s firm opposition—but it was later proven, in the subsequent market crash, that Thiel’s prediction was completely correct. One could say that this sense of humiliation became the driving force behind the later founding of Founders Fund.

After reaping a $60 million gain from the PayPal acquisition, Thiel chose not merely to increase his assets, but to systematize his investment philosophy itself. Alongside macro investing at Clarium Capital, he began working to convert sporadic angel investments into professional venture capital activities.

In 2004, Clarium Ventures (later Founders Fund), which started with just $50 million, was launched through an unusual decision: Thiel himself contributed $38 million from his own funds. At the time, institutional investors paid little attention to funds of such small size. Even Stanford University’s endowment skipped the investment.

However, Thiel’s foresight was proven quickly. His investment in Palantir, which he co-founded in 2003, was initially avoided by investors because of the slowness of government procurement processes. But it was highly valued by CIA-affiliated In-Q-Tel, and this subsequently led to explosive growth. As of December 2024, his holdings are valued at $30.5 billion, and the return rate has reached 18.5 times.

More symbolic is Thiel’s investment in Facebook. In the summer of 2004, Thiel met 19-year-old Mark Zuckerberg through a connection from Reid Hoffman and decided to invest with just a $500,000 convertible note. The terms were simple, but this decision would ultimately bring more than $1 billion in personal profit. As Founders Fund, they later obtained a $3.65 million return on a total investment of $8 million.

The involvement of Sean Parker, a member of the PayPal Mafia, changed the fund’s operating strategy. In the second fundraise in 2006, Stanford University’s endowment became the lead investor for the first time, and the fundraising amount jumped to $227 million. Thiel’s share of investments fell from 76% to 10%, and the fund came to be recognized as a true institutional investor.

Founders Fund’s biggest bet was the 2008 investment in SpaceX. At the time, SpaceX had experienced three launch failures, and the entire industry was pessimistic. Led by Nosek, the fund decided to invest $20 million—about 10% of the second fund. Many LPs (Limited Partners) thought this decision was madness.

However, the PayPal Mafia’s belief in Musk and the potential of its technology ultimately made this investment the fund’s finest work. Over 17 years, the fund invested a total of $671 million. By December 2024, following a buyback of its own shares, its assets reached $18.2 billion, achieving a 27.1x return.

At the core of Thiel’s investment philosophy is Gerard’s “desire to imitate” theory. Rather than seeking areas where other investors simply follow along, he looks for companies that solve their own unique problems. His belief is that all successful companies are different and have obtained monopolistic positions. From this perspective, as the venture capital industry chased the imitation boom of social products, Thiel turned his attention to hard tech—the world of atoms.

The “founder-first” principle established by Founders Fund was also innovative for its time. In traditional Silicon Valley, it was common for investors to actively intervene in management and even remove founders. In contrast, Founders Fund adopted the philosophy of never ousting founders. This was also a philosophy born out of the PayPal Mafia’s experience.

The three funds in 2007, 2010, and 2011 recorded the best performance in venture capital history. Compared to invested capital, they achieved total returns of 26.5x, 15.2x, and 15x, respectively. This accomplishment was the result of a fusion of Thiel’s strategic thinking, Howery’s financial modeling, Nosek’s creativity, and Parker’s deep understanding of internet products.

Born from the PayPal Mafia, Founders Fund became more than just an investment fund—it became an entity that rewrote Silicon Valley’s power map itself. Just as Thiel could read twenty moves ahead in chess, the building of this empire was likely calculated and executed with precision.