In 2004, Peter Thiel invested $500,000 in Facebook. 8 years later, his early bet had turned into more than $1 billion

In 2004, Peter Thiel put $500,000 into a young Facebook that was valued at roughly $5 million. At that point, there was no public stock price to watch and no billion-dollar company behind the name. Thiel was investing in a much smaller business whose future was still uncertain. Eight years later, his early bet had produced more than $1 billion in proceeds.

The $500,000 was not originally a bet on Facebook stock

Thiel's first $500,000 did not go into Facebook as a simple share purchase. It was made as a loan. The money was later converted into a 10% stake, based on the company's $5 million valuation at the time.

That gave Thiel a substantial position while Facebook was still a private company. He put more money into the business in 2006, joining a funding round that valued Facebook at $500 million.


The change in valuation is easy to overlook when the later numbers are so large. Facebook had gone from a company worth about $5 million to one valued at $500 million within two years. Thiel had entered before that dramatic increase had happened.

The moment Thiel could finally sell his Facebook shares

Facebook's stock-market debut in May 2012 changed the situation for early investors. Shares could now be traded publicly, but Thiel could not simply sell his entire holding whenever he wanted.

Early investors were bound by lock-up agreements. Those restrictions kept them from selling their shares immediately after the IPO. Thiel raised $640 million in May by selling shares into the flotation. The bigger sale came later, after another lock-up period ended. He sold 20 million Facebook securities, according to the regulatory filing cited in the original report.

The transactions took his total proceeds from Facebook's IPO to about $1 billion. There was an interesting twist in the timing. Facebook's share price had nearly fallen by half from its May debut. The company was still worth about $42 billion, but investors had already seen how quickly the market could turn on the newly public stock.

For Thiel, the result looked very different from the experience of someone buying Facebook shares after the IPO. His position had been built years earlier, when the company was valued at a fraction of what it was worth as a public business.

Thiel sold most of his stake but did not leave Facebook completely

Selling 20 million shares did not mean Thiel was finished with Facebook. Bloomberg reported that he still owned about 5 million shares. At a share price of $20, that remaining holding would have been worth around $100 million. The original material says $10 million, but the arithmetic does not support that figure. Five million shares at $20 each comes to $100 million.

The remaining shares also put the scale of his exit into perspective. Thiel had taken more than $1 billion out of the investment while still keeping a smaller stake. Facebook was one of several major technology bets associated with Thiel. His investments included YouTube and LinkedIn, and he had been chief executive of PayPal before eBay acquired the company.

Still, the Facebook deal had its own unusual shape. It started with a $500,000 loan to a company valued at about $5 million. It became a 10% stake, survived years of private-company growth and eventually produced more than $1 billion in proceeds. That is what makes the investment memorable. The biggest number came at the end. The real gamble happened when Facebook was still small enough for $500,000 to matter.