In this interview with WIRED, Peter Thiel discussed the lessons he learned from not participating in the Series B round in Facebook. Here’s an excerpt from the interview:
Q2 2021 hedge fund letters, conferences and more
Thiel: Whenever you have these massive up-rounds in companies led by smart investors, almost as a rule of thumb they are undervalued. I’ve done this back-testing on this where the steeper the up-round the greater the undervaluation.
It’s because when these companies have momentum, people underestimate the momentum. they underestimate when things change. They underestimate how much things have changed. It’s not just true of the outside investors, it’s also true of the people on the inside.
I course corrected on this in the Series C round in Facebook which was $525 Million pre- just one year later. It was 5x again and the question was, what have I done wrong? It was like this makes no sense at all. This is a really crazy valuation, but I’m going to still invest because there’s something about the momentum that people are missing and that was actually a round I was very glad to have participated in.
Host: How did it work out?
Thiel: Well, Facebook is worth more that $550 Million… post money in that round today.
You can watch the entire interview here:
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Article by The Acquirer’s Multiple
