The first investor in Facebook

Peter Thiel’s investment in Facebook is one of Silicon Valley’s most legendary deals. With a $500,000 investment, Thiel acquired a 10.2% stake in what was then a small college networking site in 2004 which he later sold for over $1 billion.

Thiel's ability to spot winners has been proven time and again. After co-founding PayPal with Elon Musk, he has become an early investor in SpaceX, Palantir, and Airbnb.

This week we break down how Peter Thiel makes his decisions.

• 💸 The $500,000 investment in Facebook

• 📊 How this investment became one of the most profitable in tech history

• 🧠 The contrarian thinking behind Thiel’s investments

— Investor Briefcase Team

In 2004, Peter Thiel made a bold move when he became the first outside investor on Facebook. As Mark Zuckerberg first set out to turn his dorm room project into a lasting social network, he was turned down by several Silicon Valley venture capitalists who thought his vision for a global social network was "too ambitious".

Mark eventually crossed paths with Thiel through their mutual connection, Sean Parker, co-founder of Napster. Thiel, who was known for taking calculated risks on big ideas and betting on founders with ambitious visions, decided to invest $500,000 the very same day for 10.2% of Facebook. His early investment gave Facebook the financial lifeline it needed to expand without rushing to monetize.

Eight years after his initial investment in Facebook, the company had decided to go public, which turned the original $500,000 investment by Thiel into over a billion dollars. 

As Facebook's first outside investor, Thiel made over 200 times the original investment that he had placed in the college dorm startup. Following a pre-arranged plan he decided to sell nearly 80% of his stock on the week of the IPO and his investment became known to the world as one of the most successful tech investments in history.

Beyond Facebook, Thiel has continued to build his reputation as a sharp early-stage investor. He went on to make early investments in some of the world’s most successful tech companies, including Palantir, SpaceX, and Airbnb.

With a net worth of over $10 billion, his approach to investments has been highly contrarian - placing early bets on the startups that often are ignored by Silicon Valley for being too ambitious and grand. So, how does he succeed?

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Thiel famously invests in startups that he believes can dominate entire industries rather than compete in crowded markets.

Focus on Monopolies, Not Competition

Thiel has famously said, “Monopoly is the condition of every successful business”. He believes that businesses trapped in competitive markets struggle to innovate because they’re focused on survival, while monopolies can afford to think long-term and drive progress.

Contrarian Thinking

A critical aspect of Thiel’s success is his contrarian approach to investing. He often asks, “What important truth do very few people agree with you on?” This mindset helps him identify opportunities where others see only risk. Thiel looks for startups that challenge conventional wisdom, backing founders who have bold, transformative visions for their industries.

Backing Visionary Founders

Thiel seeks out founders who have a clear, audacious vision for the future and the capability to execute it. His early investments in Facebook, SpaceX, and Palantir reflect this strategy and have made him one of the most successful early-stage investors in Silicon Valley.

Being the co-founder of PayPal has created a strong reputation for Peter Thiel, and his contrarian approach to betting small on big ideas has made him an equally successful early-stage investor.

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Each week we profile the most notorious investment stories.

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