Founders Fund, a venture capital firm founded by billionaire Peter Thiel and generating returns of approximately $1.8bn, has closed nearly all its eight-year-old bet on cryptocurrencies.
In early 2014, the fund based in San Francisco made its first bitcoin investment. It then went on to invest large amounts in crypto. According to people familiar with the fund, around two-thirds of their total investment was used for bitcoin purchases.
One of the people familiar with the matter said that Founders Fund had sold the vast majority its cryptocurrency portfolio by March 2022, before the market for digital assets became flooded in a crisis in May 2018.
According to people, the fund does not have any significant exposure to cryptocurrency at present. It has not been reported that the crypto bet is being closed. Founders Fund declined comment.
Thiel is a major backer of Republican candidates. He was also a supporter for former US President Donald Trump.
Thiel expressed optimism about bitcoin’s future in April 2022 at the same time as Founders Fund had sold most of its cryptocurrency holdings. Thiel stated that “we’re at end of fiat money regime” and suggested that bitcoin’s price, which was at $44,000 at the time, could rise by a factor 100.
Thiel stated that Jamie Dimon, chief executive of JPMorgan, and Larry Fink, BlackRock boss, ‘need’ to allocate some of their money for bitcoin’. He added: ‘We must push back against them.
Bitcoin’s price soared from $750 in 2014, to an all-time high above $65,000 in November 2021. Its price has fluctuated in recent years. There have been several major drops in its value, including a fall to $15,500 last November, which was a two-year high.
Since May 2013, the digital assets market has been in turmoil, with high-profile companies like Terraform Labs and Celsius, Voyager, Three Arrows Capital going bankrupt.
November saw market sentiment toward crypto further eroded when FTX, second-largest cryptocurrency exchange shut down owing creditors over $3bn and its cofounder Sam BankmanFried was arrested with multiple fraud charges.
Bitcoin had lost approximately three-quarters its value since its peak in December and the global crypto market had lost more than $2tn.
Many Silicon Valley blue-chip investors have invested in digital currencies in the past few years. However, most of them have concentrated their investments on equity stakes rather than directly buying cryptocurrencies.
A16z crypto, the crypto arm at venture firm Andreessen Horowitz, has exceptions to this rule. It raised $4.5bn last year and invests directly in tokens and coins.
Paradigm, a crypto-venture firm, was also founded by Fred Ehrsam, Coinbase founder, and Matt Huang, Sequoia Capital partner. It raised $2.5bn in the late 2021.
Many large financial institutions avoided cryptocurrency due to concerns about cyber security, their potential links with money laundering and drug trafficking. Dimon of JPMorgan called bitcoin a fraud in 2017.
The shift in crypto focus of Founders Fund was one of nine major exits that venture fund made between 2020 to the end of last fiscal year, which allowed it to return approximately $13bn to its investors.
Other exits included initial public offerings by companies it had supported since early fundraisings, like Palantir and Airbnb, which Thiel co-founded.
Thiel founded PayPal in 1998 with his partner. He went on to be one of Silicon Valley’s most successful venture capitalists, and was the first to back Facebook.
Founders Fund manages more than $11bn, with $5bn in capital raised through two funds last year. It has also taken stakes at more than 100 companies such as Elon Musk’s SpaceX, Lyft, and defense tech group Anduril.
The fund is currently in discussions to acquire an equity stake in OpenAI the developer of chatbot ChatGPT at a value of $29bn.
