> That's a 6,000x return on his capital in 5 years.
> I'll put it this way--if you made a $250 IRA contribution in 2005, it would have to be worth $1,500,000 today to match that return.
If you invested one penny that investment would now need to be worth $60 to match that return. Maybe it is just me, but $250 to $1.5M doesn't help me visualize a 6000x return at all. This analogy reminds me of an old Dennis Miller bit from Saturday Night Live where to illustrate the size of the national debt he takes out a dollar bill and says "it would take stack of these 3 trillion high to pay it back".
I'll point out the blindingly obvious that nobody else can bring themselves to point out - future rounds have likely reduced that original 10% to a somewhat smaller number. There is also a pretty good chance that Thiel has taken some off the table, further reducing his stake.
We can be sure, mathematically, that a lottery ticket is a bad investment overall even if it pays off. For example, repeating it 100,000,000 times is nearly certain to leave you with less than you started.
Plausibly, the decision to invest in Facebook (and similar opportunities when they present themselves) had a positive expected return at the time. Even knowing Facebook is an outlier result -- like a winning lottery ticket -- its payoff actually gives us a hint that the original decision was positive-expectation, and its magnitude. (The fact that a lottery ticket happens to win changes our idea of the original expectation not at all.)
Also of note: Thiel didn't just invest money, he invested his expertise and network. That, which almost certainly helped Zuckerberg aim higher and avoid pitfalls/compromises that took down other companies, was one of the best non-monetary investments ever.
Yup, as article commenters point out, this blog post is wrong for comparing Google VCs to a Facebook angel investor instead of comparing the Google angel investors.
Do people really believe that if Facebook goes public that it will be worth more than Google when it went public? I want to know the details of how people (i.e. Forbes Magazine) came up with the $33B valuation.
If I had $500K lying around in Fall '04 I would have been chasing down Mark Zuckerberg trying to get him to take it for whatever tiny piece of the company I could get.
Being at one of the first set of "facebook schools" it was very clear where things were headed. The amount of mindshare facebook had on campus within the first couple weeks of the semester was absolutely staggering.
[+] [-] 1va|15 years ago|reply
If you invested one penny that investment would now need to be worth $60 to match that return. Maybe it is just me, but $250 to $1.5M doesn't help me visualize a 6000x return at all. This analogy reminds me of an old Dennis Miller bit from Saturday Night Live where to illustrate the size of the national debt he takes out a dollar bill and says "it would take stack of these 3 trillion high to pay it back".
[+] [-] ghshephard|15 years ago|reply
Still a great investment.
[+] [-] staunch|15 years ago|reply
[+] [-] rmorrison|15 years ago|reply
[+] [-] robryan|15 years ago|reply
[+] [-] ww520|15 years ago|reply
[+] [-] gojomo|15 years ago|reply
Plausibly, the decision to invest in Facebook (and similar opportunities when they present themselves) had a positive expected return at the time. Even knowing Facebook is an outlier result -- like a winning lottery ticket -- its payoff actually gives us a hint that the original decision was positive-expectation, and its magnitude. (The fact that a lottery ticket happens to win changes our idea of the original expectation not at all.)
Also of note: Thiel didn't just invest money, he invested his expertise and network. That, which almost certainly helped Zuckerberg aim higher and avoid pitfalls/compromises that took down other companies, was one of the best non-monetary investments ever.
[+] [-] ankimal|15 years ago|reply
Also, there is some debate over the $24 the dutch bought Manhattan for from the Indians. Jury is still out on that one.
[+] [-] rms|15 years ago|reply
[+] [-] aseem|15 years ago|reply
[+] [-] riffer|15 years ago|reply
It's that he has one of the best investment processes.
[+] [-] kiba|15 years ago|reply
[+] [-] btucker|15 years ago|reply
Being at one of the first set of "facebook schools" it was very clear where things were headed. The amount of mindshare facebook had on campus within the first couple weeks of the semester was absolutely staggering.
[+] [-] wyclif|15 years ago|reply
[+] [-] aberkowitz|15 years ago|reply
[+] [-] gojomo|15 years ago|reply
[+] [-] huhtenberg|15 years ago|reply
That's 2-3 billion Zuckerbucks as some banking people call 'em :)
[+] [-] bretthellman|15 years ago|reply