• Pierre Omidyar Involved in Effort to Help Gawker in its Appeal

    Screen Shot 2016-05-28 at 11.32.34 AMWell, this story keeps getting more and more interesting.

    According to a newly published account in the New York Post, Pierre Omidyar, the billionaire founder of eBay, is involved in an effort to help Gawker Media in its appeal of a $140 million judgement that was awarded to Hulk Hogan following Gawker’s release of a sex tape involving the former wrestler.

    Specifically, First Look Media, an online news venture that includes the The Intercept and which is financially backed by Omidyar, is reaching out to other media organizations to file friend-of-the-court briefs to influence an appeals court’s decision in support of Gawker.

    According to the The Post, by “filing the amicus briefs in support of Gawker, First Look could effectively elevate the trial into a First Amendment rights case,” one that would “pit” the media organizations supporting Gawker against a powerful foe of the organization: billionaire Peter Thiel.

    As is widely known by now, Thiel revealed earlier this week that he’s been financially aiding Hogan’s case, to the tune of $10 million. The reason, Thiel said: he deems a Gawker bully whose work often has no connection with the public’s interest.

    Thiel did not respond to requests for comment this week.

    But Omidyar said this afternoon that any perceived animus between himself and Thiel is non-existent. In a tweet following the Post’s publication of its story, Omidyar writes that he has “never met Peter,” that he respects Thiel’s work as a venture capitalist, and that there is no “bad blood.”

    Omidyar was featured periodically in Valleywag, though its coverage was relatively tame compared to some of its posts about other Silicon Valley executives.

    More here.

    Connie

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  • For Peter Thiel, Revenge on Gawker May Have Been a Dish Best Served Cold

    Screen Shot 2016-05-28 at 11.05.26 AMAccording to a Forbes report published last night, billionaire investor Peter Thiel has been quietly funding the case that Hulk Hogan (whose real name is Terry Bollea) has brought against the online news organization Gawker.

    Bollea has won for now. A Florida jury awarded Bollea $140 million in March over a sex tape that Gawker published in 2012. And today, Judge Pamela Campbell denied a motion by Gawker that called for a retrial, as well as denied a motion to reduce the penalties awarded by the jury.

    Still, as ABC News notes, now that Gawker’s “motions to strike” have failed, the company can continue with the appeals process. (First Amendment specialists think it’s possible Gawker will win or else see Bollea’s reward reduced.)

    The race to out Thiel seemed to begin earlier in the day yesterday, when the New York Times quoted Gawker founder Nick Denton as saying he believed Bollea’s case was being bankrolled by someone in Silicon Valley.  Denton explained that Bollea’s lawyer had removed a claim that would have caused Gawker’s insurance company to cover Gawker’s legal costs and payout in the event of a loss; the implication was that money wasn’t the only or primary factor in Bollea’s suit.

    Denton didn’t hint at Thiel in the text of the piece, but the Times seems to have confirmed Forbes’s account subsequently.

    Assuming Thiel has been paying Bollea’s attorney (Thiel hasn’t responded to our request for comment), it is news that should “disturb everyone,” writes Josh Marshall of Talking Points Memo. “[B]eing able to give massive political contributions actually pales in comparison to the impact of being able to destroy a publication you don’t like by combining the machinery of the courts with anonymity and unlimited funds to bleed a publication dry.”

    The chilling effects are obvious, though it’s not exactly news that the entire legal system is up for sale. Even Denton, speaking to the Times before Thiel’s involvement was discovered, noted that: “If you’re a billionaire and you don’t like the coverage of you, and you don’t particularly want to embroil yourself any further in a public scandal, it’s a pretty smart, rational thing to fund other legal cases.”

    And, no matter what the moral and strategic implications of this kind of thing, it’s still legal.

    Indeed, if Thiel wanted to attack Gawker, it’s hard to conjure up as clever a way to get revenge on the outlet, whose now-shuttered gossip site Valleywag regularly published posts about Thiel during its heyday nearly a decade ago.

    This reporter spoke with Thiel numerous times about how he was portrayed by Valleywag’s then-editor, Owen Thomas, a sharp journalist who didn’t miss an opportunity to offer his take on Thiel’s essays, ties to other organizations, tax strategies, and sexual orientation.

    More here.

    Connie

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  • Peter Thiel’s Other Fund, Mithril Capital Management, Raises $600 Million

    Ajay RoyanPeter Thiel is having a good month.

    According to a new SEC filing, low-flying Mithril Capital Management, which Thiel co-founded with longtime colleague Ajay Royan in 2012, is out raising its second fund with a $600 million target. Sources say the fund is already oversubscribed, however, and that it may hit $1 billion before it holds a final close.

    Emails and a call to the firm were not returned Friday afternoon.

    The vehicle marks the second giant fund that involves Thiel in one week’s time. The Friday before last, Founders Fund, the early-stage venture firm he co-founded in 2005, closed its sixth fund with $1.3 billion.

    There’s seemingly no end to LPs’ appetite for anything involving Thiel, though it’s also worth noting that aside from his involvement, the firms don’t feature much overlap.

    StrictlyVC sat down with Royan in 2014 to discuss Mithril, which is named after a fictional metal from J. R. R. Tolkien’s fantasy writings. The way he explained its focus then was as a growth-stage fund, one focuses on established companies that are leveraging tech in some way but are not necessarily tech companies. (He compared it, in fact, to a young General Atlantic.)

    Though Mithril has backed some tech companies, including the cloud service marketplace AppDirect; Classy, which provides online fund-raising services for nonprofits; and the data analysis giant Palantir (which is one of Founders Funds’ biggest bets to date), it has numerous bets that better underscore its mandate, including to fund companies too mature for many VCs yet that don’t fit the mold of a private equity investment, either.

    More here.

    Connie

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  • Pretty Funny: Peter Thiel

    141111083404044Silicon Valley’s denizens are famously brainy. But many are also perceived as taking themselves too seriously. Peter Thiel, the investor and entrepreneur, has long been relegated to the latter camp, partly because of his controversial views on the merits of dropping out of college, and partly owing to what are often characterized as his extreme libertarian views. But in many appearances that Thiel has made this fall while promoting his new book, “Zero to One,” he has shown another side of himself: talented raconteur.

    Yesterday, in conversation with longtime reporter Bambi Francisco at an event co-sponsored by her media company, Thiel – who is among Francisco’s investors – seemed especially at ease, effortlessly making one funny observation after another.

    Of party rounds, for example, where startups may raise $1 million from 10 investors, Thiel said he’d guess that they’ve typically underperformed relative to startups that raise capital from fewer investors. “The reality is when you have two [backers], they’ve really thought about it, versus 20 [investors, where] it turns out nobody has.” Pushed back by Francisco on the topic (Thiel has himself written $250,000 checks, she noted), Thiel added, to laughter from the crowd, “I don’t think there’s anything morally wrong with it. People have the right to invest their money. They have the right to invest their money badly.”

    Thiel also offered an amusing analogy to explain why people are uncomfortable with the idea of pursuing a monopoly, though he thinks it’s stupid to do otherwise. “If you have a company that’s aiming for monopoly, there’s no one else doing it and you don’t get validation from other people. If you’re doing something that’s really competitive, there are lots of other people doing it and it ends up being validating, though it may be a dumb idea.

    “The autobiographical version I always tell is that I was hyper-tracked as a kid. In my eighth-grade junior high school yearbook, one of my friends wrote, ‘I know you’re going to get into Stanford in four years.’ I got into Stanford four years later. I went to Stanford Law School. I got good grades; I ended up at a top New York law firm. From the outside, it was a place that everybody wanted to get in; from the inside, it was a place that everybody wanted to get out. [Audience laughter.] Seven months and three days later [when I was leaving], somebody down the hall from me said, ‘I didn’t realize it was possible to escape from Alcatraz.’ [I said], ‘All you have to do is go out the front door and not come back.’”

    Thiel has certainly had plenty of opportunities in recent months to perfect his act, which he acknowledged. Asked about the car service Uber, for example, Thiel noted that as an investor in Uber competitor Lyft, he’s “extremely biased.” He then gleefully added, “I’m on record as saying I think Uber is the most ethically challenged company in Silicon Valley, and I’m willing to repeat that every single time at one of these events.”

    Thiel was even charming in recounting missteps along his current book tour, including a September appearance on CNBC, where Thiel said of Twitter: “Twitter is hard to evaluate. They have a lot of potential. It’s a horribly mismanaged company—probably a lot of pot-smoking going on there. But it’s such a solid franchise it may even work with all that.”

    Thiel reiterated yesterday that he thinks Twitter could be better run, calling LinkedIn, which enjoys the same valuation, “much better managed.” But Thiel said his televised comment was largely a “pro Twitter comment. The larger context was that if you have a monopoly, you can screw up everything else.”

    Media outlets are “always trying to get you to say controversial things,” said Thiel, who says he realized pretty quickly that he’d gone further than intended on CNBC when he saw a beaming executive waiting in the wings.

    “As I left the studio, the CEO of CNBC was smiling, and he was like, ‘You did a great job, Peter. We’d love to have you back any time you want to be back here.’ I thought, Wow, have I said too much?”

    Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.

    Connie

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  • StrictlyVC: October 8, 2014

    It is Wednesday! All right, all right. Hope you have a great morning, everyone.

    (Web visitors, here’s an easier-to-read version of today’s email, which went out around 7 a.m. PST.)

    —–

    Top News in the A.M

    Twitter announced yesterday that it’s suing the U.S. government, saying that restrictions on what it can say publicly about the government’s requests for user data violate its First Amendment rights.

    It’s a contagion: Now software giant Symantec is thinking about breaking itself into two, too.

    —–

    Peter Thiel: Apple is No Longer a Tech Company — and Neither is Google

    eter Thiel has been overturning the furniture at nearly every stop of a ongoing tour to promote his new book, Zero to One. An appearance yesterday morning at a conference in Half Moon Bay, south of San Francisco, was no different.

    In a half-hour sit-down that showcased Thiel’s talent for saying the unexpected, Thiel compared Apple to Coca Cola, saying Apple is no longer a technology company but a hugely successful marketing company. He then suggested that Google – challenged as it seems to be in putting the roughly $60 billion on its balance sheet to work – is also deluding itself in its continued belief that it’s a technology company.

    “These companies end up building up cash because they are out of ideas relative to size of company,” said Thiel, characterizing both Apple and Google as “in denial.” That happens when “your brand is still as a tech company . . . But as soon as you start buying back your shares, a complete admission of failure as a technology company is complete.”

    (Apple began paying shareholders dividends two years ago. Thiel gives Google “at least a decade” to begin providing shareholders with a dividend, given the company’s stock structure, which has further cemented the control of founders Larry Page and Sergey Brin over time.)

    Thiel’s comments are sure to stir up discussion in tech circles, particularly after the excitement that Apple in particular has generated around its newest iPhones; its Apple Watch, expected early next year; and its highly anticipated mobile payment platform, which is reportedly being released in two weeks as part of Apple’s newest iOS update.

    The observations took yesterday’s crowd by surprise, too. Earlier in the sit-down, Thiel had talked at length of being a “big fan” of founder-led businesses, including Google. “I think those that are not have a tremendous problem,” he said. He also called Apple the “paradigmatic” “zero to one” kind of company whose breakthrough technologies have repeatedly changed the world.

    Still, times change and Apple no longer has Steve Jobs at the helm. And while Thiel said he didn’t “want to take pot shots at [Apple CEO] Tim Cook” given the “impossibly big” shoes he has had to fill, Thiel suggested that Apple’s future now depends very much on how close smart phones are “to their final form,” as Apple seem unlikely to create anything revolutionary going forward. “If there isn’t much more to do with [the advancement of] smart phones, it’ll be like marketing Coke and Pepsi and will produce [a lot revenue for Apple] for years to come,” said Thiel.

    As for Google, Thiel acknowledged that the company is “still trying a lot of things,” an understatement if ever there was one. But he called it “striking that even a company like Google . . . is building up more and more cash.”

    Google’s former CEO and now executive chairman Eric Schmidt “was used to getting attacked from investors [for] spending money on flaking things,” said Thiel, but at least Schmidt was spending. Given that the company has done so little with its cash hoard despite a zero-interest rate environment, it’s hard to imagine it capable of much beyond iterating on its core search monopoly, suggested Thiel.

    In fact, Thiel told the audience, “If you’re investing in Google, you’re probably hoping at some point that they’ll admit that they’re no longer a tech company and buy back your shares at a higher price.”

    —–

    New Fundings

    Atopix Therapeutics, a 1.5-year-old, Abingdon, England-based biopharmaceutical company that’s developing so-called antagonists for allergic disease, has raised an undisclosed amount of funding from new investor SR One, the corporate venture capital arm of GlaxoSmithKline. Atopix had raised £3.7 million in Series A funding last year led by MPM Capital, SV Life Sciences and Wellington Partners, with additional participation by Bessemer Venture Partners and Red Abbey.

    Avidity NanoMedicines, a two-year-old, La Jolla, Ca.-based company that’s developing cancer therapies, has raised $6 million in a convertible note co-led by Fidelity Biosciences and TPG Biotech. Other participants in the funding include Brace Pharmaceuticals, Partner Fund Management, and earlier investor Alethea Capital Management.

    Azuqua, a 3.5-year-old, Seattle-based company whose software helps businesses create processes that integrate multiple software-as-a-service applications, has raised $5 million from Ignition Partners. Xconomy has more here.

    Cardiac Dimensions, a 13-year-old, Kirkland, Wa.-based medical device company that’s focused on treating functional mitral regurgitation, a condition seen in heart-failure patients, has added $8.5 million to a $20 million round it raised earlier this year, including from Lumira Capital and M.H. Carnegie & Co. The new capital comes from Arboretum Ventures. The company has now raised $44.9 million altogether, shows Crunchbase.

    Cloudcade, a 10-month-old, San Francisco-based mobile gaming startup with a tablet-first approach toward deployment, has raised $1.55 million in seed funding from IDG Capital Partners.

    Comply365, a seven-year-old, Beloit, Wi.-based mobile enterprise software company, has raised $12 million in Series A funding led by Columbus, Oh.-based Drive Capital. The company had previously raised $2 million in seed funding, shows Crunchbase. Xconomy has more on what piqued Drive’s interest here.

    Crowdfunder, a 2.5-year-old, L.A.-based crowd funding platform that helps connect entrepreneurs and investors, has raised a $3.5 million in Series A funding from Bridge 37 Ventures, Ideas & Capital Venture Capital, Capital Nuts, and Tim Draper. The company had raised $1 million in seed funding from numerous sources back in February, including 500 Startups and K5 Ventures and raised an earlier $400,000 seed round in 2012.

    Depict, a year-old, San Francisco-based online platform for art that invites users to explore digital work by new artists, has raised $1.6 million in funding from investors that include Bruce Gibney of Founders Fund, Jim Pallotta of Raptor Ventures and Thomas Andrae of 3M New Ventures.

    Frankly, a 3.5-year-old, San Francisco-based private mobile-messaging service, has raised $12.8 million in funding from JJR Private Capital, Stanford University’s StartX Fund and SK Planet.

    HangIt, a months-old, New York-based company whose mobile marketing platform company is slated to launch later this year, has raised $6.2 million in seed funding from Atlanta-based Vesta Labs, where the company was incubated.

    Justworks, a two-year-old, New York-based low-cost payroll and benefits platform, has raised $6 million in Series A funding from Index Ventures and Thrive Capital. The company has raised $7 million altogether.

    LeadGenius, a three-year-old, Berkeley, Ca.-based maker of cloud-based sales software that helps generate and convert leads, has raised $6 million in Series A funding led by Sierra Ventures. Other participants in the round include Fuel Capital, FundersClub, Initialized Capital, Kapor Capital, Scott Banister and earlier backers 500 Startups, Bee Partners, CRCM, Scrum Ventures and Sam Altman. (The company had raised three rounds of undisclosed amounts of capital prior, shows Crunchbase.)

    Interana, a two-year-old, Menlo Park, Ca.-based company whose data-analytics software helps determine how users are interacting with software and services in a corporate network, has raised $8.2 million in Series A funding, including from Battery Ventures, Data Collective, Fuel Capital, SV Angel, and Y Combinator.

    Morsel, a new, Chicago-based social community for culinary enthusiasts, has raised $800,000 in seed funding from GrubHub cofounder Matt Maloney, Chicago Ventures, Merrick Ventures, and other Chicago and San Francisco angels. GigaOm has more here.

    Product Hunt, a 10-month-old community board where people can up vote tech products, has official announced that it raised $6.1 million in a Series A funding led by Andreessen Horowitz. Other investors to participate include Reddit co-founder Alexis Ohanian, A-Grade Investments, betaworks, Cowboy Ventures, CrunchFund, Greylock Partners, Ludlow Ventures, Slow Ventures, SV Angel, Tradecraft, Naval Ravikant, Nir Eyal, Abdur Chowdhury, and Andrew Chen. The new funding brings Product Hunt’s total investment to date to $7.1 million. TechCrunch had reported last month that the startup was zeroing in on $6 million.

    Segment, a three-year-old, San Francico-based company whose software collects customer data, then funnels it into a variety of analytics and marketing tools, has raised $15 million in Series A funding led by Accel Partners, with participation from Kleiner Perkins Caufield & Byers and e.ventures. The company, previously called Segment.io, has now raised $17.6 million altogether. VentureBeat has more here.

    SolidFire, a four-year-old, Boulder, Co.-based company that builds scale-out, high-performance storage systems for cloud service customers, has raised $82 million in new funding led by Greenspring Associates, Silicon Valley Bank and an unnamed sovereign-wealth fund. Earlier investors Novak Biddle Venture Partners, Samsung Ventures and Valhalla Partners also joined the round, which brings the company’s total funding to $150 million.

    SolidX Partners, a months-old, New York-based financial services firm that provides swaps to hedge funds, family offices and other institutional investors, has raised $3 million in seed funding led by Liberty City Ventures, with participation from Red Sea Ventures, Red Swan Ventures, and individual investors Stanley Shopkorn and Jim Pallotta.

    Stellar Loyalty, a months-old, Foster City, Ca.-based company that makes cloud-based, customer loyalty applications, has raised $5 million in Series A funding led by InterWest Partners.

    Synlogic, a year-old, Boston-based next-generation synthetic biology company that’s developing microbes as therapeutics, has added $5 million to a $29.4 million Series A round that the company closed earlier this year from Atlas Venture and New Enterprise Associates. Its new backer is the Bill & Melinda Gates Foundation.

    Uniplaces, a two-year-old, U.K.-based online booking platform focused on student accommodations, has raised $3.5 million in Series A funding led by earlier investor Octopus Investments, which had funded the company with £700,000 last November. Numerous other angel investors also participated in the round. TechCrunch has more here.

    —–

    New Funds

    Formation 8, the two-year-old, San Francisco-based venture capital firm co-founded by Palantir co-founder Joe Lonsdale, is targeting $500 million for its second fund, shows an SEC filing first flagged by VentureBeat. The firm closed its debut fund in the spring of 2013 with $448 million and has backed more than 30 companies (that it has disclosed) since, including BuildZoom, a 2.5-year-old, San Francisco-based online marketplace for remodeling and construction services.

    —–

    IPOs

    AutoGenomics, a 15-year-old, Vista, Ca.-based commercial-stage molecular diagnostics company that has twice before tried to go public and pulled its filing (in 2008 and in 2013), has filed again, with plans to raise up to $60 million. The company appears to be backed exclusively by non-institutional investors. Its S-1 is here.

    Histogenics, a 14-year-old, Waltham, Ma.-based regenerative medicine company focused on the musculoskeletal segment of the marketplace, hasfiled to raise up to $65 million in an IPO. Two of its biggest outside shareholders are Sofinnova Ventures, which owns 27 percent of the company, and Split Rock Partners, which owns 18 percent.

    —–

    Exits

    Ducksboard, a three-year-old, Barcelona-based maker of real-time dashboards for tracking business metrics from a broad set of application sources, has been acquired by the privately held software analytics company New Relic. Ducksboard had raised roughly $750,000 in seed funding, shows Crunchbase. Its investors include the Spanish venture firms Kibo Ventures and Cabiedes & Partners.

    Evolv, a seven-year-old, San Francisco-based big data company that helps solve workforce issues by analyzing employee performance data, has been acquired by the publicly traded company Cornerstone OnDemand for $42.5 million in cash. Evolv appears to have raised exactly that amount from investors across four rounds, per Crunchbase data. Its investors include GGV Capital, Khosla Ventures, Lightspeed Venture Partners and VantagePoint Capital Partners.

    —–

    People

    Remember how we all thought Google+ was going the way of the dodo bird? That is incorrect, says Google’s new head of social media, David Besbris.

    Vanity Fair takes a deep dive into Microsoft, writing of cofounder Bill Gates and longtime CEO Steve Ballmer that people “liken the relationship . . .to a marriage. ‘It is like couples that get divorced and hook up again,’ says someone who knows both men. ‘Trying to explain the relationship from the outside is a waste of chronology.’”

    Kyle Lui has joined the global venture firm DCM as a principal in its Menlo Park, Ca. office. Lui was most recently a director of product management at Salesforce. He was also the cofounder and CEO of the enterprise perks management startup ChoicePass, which was acquired in 2012 by Salesforce.

    —–

    Jobs

    Kaiser Permanente is looking to hire a director into its corporate venture arm, which focuses on IT, healthcare services, medical devices and diagnostics startups. The job is in Oakland, Ca.

    —–

    Data

    At the start of the year, 36 companies were listed in the WSJ’s “billion dollar startup club.” Now there are 62, says the outlet.

    —–

    Essential Reads

    Facebook has built something that sounds like a clone of Secret but is not, says its product manager, Josh Miller.

    —–

    Detours

    According to a new study, we really, really love it when others write to express their deep affection for us.

    The quiet rise of the satellite spy agency.

    This morning’s lunar eclipse in photos.

    —–

    Retail Therapy

    Sure, the Coolest Cooler is cool, but is it as cool as an IcyBreeze portable cooler and air conditioner? (Really, is it? Serious question.)

    Dress Pant Jogger Pants. We like the idea, Tony Conrad.

    Related articles

    Connie

  • Peter Thiel: Apple Is No Longer a Tech Company – and Neither is Google

    peter-thielPeter Thiel has been overturning the furniture at nearly each stop of a current tour to promote his new book, Zero to One. An appearance this morning at a conference in Half Moon Bay, south of San Francisco, was no different.

    In a half-hour sit-down that showcased Thiel’s talent for saying the unexpected, Thiel compared Apple to Coca Cola, saying Apple is no longer a technology company but a hugely successful marketing company. He then suggested that Google – challenged as it seems to be in putting the roughly $60 billion on its balance sheet to work – is also deluding itself in its continued belief that it’s a technology company.

    “These companies end up building up cash because they are out of ideas relative to size of company,” said Thiel, characterizing both Apple and Google as “in denial.” That happens when “your brand is still as a tech company . . . But as soon as you start buying back your shares, a complete admission of failure as a technology company is complete.”

    (Apple began paying shareholders dividends two years ago. Thiel gives Google “at least a decade” to begin providing shareholders with a dividend, given the company’s stock structure, which has further cemented the control of founders Larry Page and Sergey Brin over time.)

    Thiel’s comments are sure to stir up discussion in tech circles, particularly after the excitement that Apple in particular has generated around its newest iPhones, its Apple Watch (expected early next year), and its highly anticipated mobile payment platform, which is reportedly being released in two weeks as part of Apple’s newest iOS update.

    The observations likely took the crowd by surprise, too. Earlier in the sit-down, Thiel had talked at length of being a “big fan” of founder-led businesses, including Google. “I think those that are not have a tremendous problem,” he said. He also called Apple the “paradigmatic” “zero to one” kind of company whose breakthrough technologies have repeatedly changed the world.

    Still, times change, he noted. Apple no longer has Steve Jobs at the helm. And while Thiel said he didn’t “want to take pot shots at [Apple CEO] Tim Cook” given the “impossibly big” shoes he has had to fill, Thiel suggested that Apple’s future now depends very much on how close smart phones are “to their final form,” as Apple is unlikely to produce anything revolutionary going forward. “If there isn’t much more to do with smart phones, it’ll be like marketing Coke and Pepsi and will produce [a lot revenue for Apple] for years to come,” said Thiel.

    As for Google, Thiel acknowledged that the company is “still trying a lot of things,” an understatement if ever there was one. But he called it “striking that even a company like Google . . . is building up more and more cash.”

    Google’s former CEO and now executive chairman Eric Schmidt “was used to getting attacked from investors [for] spending money on flaky things,” said Thiel, but at least Schmidt was spending. Given that the company has done so little with its cash hoard despite a zero-interest rate environment, there’s little reason to believe it’s capable of much beyond iterating on its core search monopoly, suggested Thiel.

    In fact, Thiel told the audience, “If you’re investing in Google, you’re probably hoping at some point that they’ll admit that they’re no longer a tech company and buy back your shares at a higher price.”

    Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.

    Connie

  • Inside Mysterious Mithril Capital

    Ajay RoyanOne of the best-known things about Mithril Capital Management is that it is named after a fictional metal from J. R. R. Tolkien’s fantasy writings. Put another way, the 22-month-old investment firm, cofounded by influential investor Peter Thiel and his longtime colleague Ajay Royan, remains mostly a mystery, even to those in San Francisco, where it’s based.

    That’s probably because local investors don’t see much of the firm, suggests Royan, sitting in a modern conference room at the firm’s well-appointed offices in the Presidio, where roughly a dozen people — principals to vice presidents who’ve worked for one of Thiel’s past companies — are trying to create a kind of modern-day Berkshire Hathaway.

    More specifically, Mithril is assembling a highly concentrated portfolio of companies that most in Silicon Valley have never heard of, let alone would ever fund. (Think underwater robots in Toulouse, France, and a Boston-based technology company that’s enabling travelers to book train tickets the same way for every rail line.) It’s going long on these companies, too. When the firm raised $540 million for its debut fund, it turned not to institutional investors but “larger family endowments and sovereigns,” who agreed to let Royan and Thiel lock up their money for as long as 12 years. The pair, who personally contributed up to a fifth of the fund’s capital, told investors they wanted the option to wait out markets if necessary.

    Of course, Berkshire Hathaway’s founder Warren Buffett famously doesn’t invest in technology. But Royan, who speaks in elegant paragraphs peppered with scholarly references, says that’s a product of timing. Tech was a “boom and bust” industry once, not a long-term bet. Today, he says, “If you ran the Warren Buffett gambit in 2014 de novo, you’d probably only be doing technology-driven investing, because that’s where you build [today’s] lasting franchises.”

    StrictlyVC talked with Royan last week; here’s some of that chat, edited for length:

    You were born in India, raised in Abu Dhabi and graduated from Yale – a degree in political economy in hand — by age 20. What did you want to do, and how did you wind up working alongside Peter Thiel?

    I wanted to be an industrial designer; I wanted to be an entrepreneur. And I became aware of Peter through mutual friends around a friend’s wedding in New York. At the time, he’d recently sold PayPal to eBay and was thinking about [starting his hedge firm] Clarium [Capital Management] and our initial conversations were around my joining him as an entrepreneur in residence and starting a company.

    And you did, eventually becoming a managing director at Clarium. Why leave to co-found Mithril with Thiel in 2012? What was the impetus?

    With a hedge fund, people can invest whenever they want but they can also redeem whenever they want; it doesn’t matter how successful you are. And a big macro event like the 2008 financial crisis created a [system-wide need for liquidity] precisely when, because you have convictions and a view of the future, you wanted to invest more. That led to a conversation about permanent capital and longer-term investing.

    What was the initial idea?

    The initial idea was to have permanent capital, for it to almost be like a corporation that would go public 15 years down the line, and Peter and I would happily lock up our own capital for that period. [But] that turned out to be a very radical proposal. People were like, “Whoa.” [Laughs.] So we ended up defaulting to a more standard fund structure. But we asked for people to be thoughtful about how to make it a long term fund, so it has almost a six-year investment period [so we can wait out frothy markets if we want]. It’s also . . . almost a 12-year fund, so when we talk with entrepreneurs, we can say [that while] we started in 2012, we can have a view inside this balance sheet all the way to 2024.

    You’ve made seven bets so far, in very disparate types of companies. One of them is C2F0, a collaborative cash flow optimization company in Kansas City that tries unlocking capital trapped in trade relationships. What kind of process led you to the company?

    There was this question-asking process basically saying: Are there things other than credit underwriting that make sense in an economy where it’s hard to mobilize capital? Who’s thinking about this? And our team ran a screen and we looked at companies in the space; we looked to see if they were working with good investors and whether they had a technology DNA, because you do have a lot of financial people who think about stuff like this, but we didn’t want a transactional business. We didn’t want to do an exchange on Wall Street.

    How many companies do you talk with, who at the firm ultimately decides what Mithril will fund, and what size checks is the firm writing?

    I think we’ve [funded] less than 1 percent of what we’ve looked at in the last 20 months . . . The investment committee is Peter and myself [because] we want to be able to make decisions quickly . . . And we make investments between $20 million and $100 million-plus in size.

    Have you written a $100 million check?

    We have a $100 million exposure, including reserves, to a company, already [though I can’t say which]. It’s not in stealth, but we haven’t announced the investment at the company’s request. But we do have about 20 percent of the fund committed to a single name at this point.

    (We’ll be running more of our interview with Royan this week, readers, so stay tuned.)

    Connie

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