Peter Thiel on the importance of pitching your startup as a “discount to the future”

I'll give one perspective as an investor that I have. People think about this to some extent, but it's not the way people often talk about it. So one of the standard negotiation when you're raising a financing round is always what's the valuation of your company? The investors want to have a low valuation. The founders, you want to have a high valuation. And it's typically framed as some sort of premium on the last round. The last round was here, we've made all this progress. Now we deserve something that's twice that much, four times that much, or that's sort of the way the debate gets typically framed. Now, I think that's conceptually completely wrong. The value is never a premium on the past. It's always a discount to the future. So I think the way I always think one should try to pitch a company or the value of a company is by explaining why it will be worth a lot more in the future. So the investors are getting to invest at a point that's a lot cheaper than it will be for the share price a year, two, three years from now. When we started PayPal, we had sort of a whole series of different financing rounds. In early 99, mid 99, late 99, we launched it. The product was starting to take off. We had sort of one crazy up round in March 2000 vis a vis December 99. So December 99 round, it was about 45 million post. We then had a 5050 combination with Elon's company. And then we did the March 2000 round. Three months later we did a 500 pre. So it was sort of roughly 5x step up on a per share basis, 500 pre, 600 posts. And so there's always a question, how do you get a 5x step up in 3 months? Even if a product's growing pretty quickly, it's kind of a hard thing to. How do you convince people to do that? And the way we presented the round was, this is going to be the last round before the ipo. And so you got people thinking, okay, the next thing is the ipo. So you're getting in at a discount to the ipo. It doesn't matter what happened three months ago, you're getting at a discount to the ipo. So always think of it as a discount to the future, never a premium on the past.