Peter Thiel’s venture capital-style political strategy yields low returns

Peter Thiel entered the 2022 midterm season with a bang, writing two $10mn cheques to a pair of handpicked Senate candidates and positioning himself as the Republican party’s next political kingmaker.

Yet just three weeks before the elections, Thiel’s big experiment is in jeopardy, with one of his candidates struggling in the polls and both failing to match their Democratic opponents’ fundraising despite Thiel’s cash injections.

At the same time, Thiel and his candidates — Blake Masters in Arizona and JD Vance in Ohio — have struggled to muster support with the Republican establishment, raising questions about the Silicon Valley billionaire’s long-term relationship with the party’s gatekeepers, such as Mitch McConnell, the Senate’s top Republican.

In interviews, Republican political strategists and longtime associates of the PayPal co-founder and early Facebook investor say his unconventional political giving is heavily influenced by his background as a venture capitalist. His strategy closely mirrors the industry from which he hails: make a few big, early and targeted bets on a couple of campaigns.

Yet some of those people said they struggled to see the wisdom of this formula, especially in high-profile Senate races that are likely to determine which party effectively controls Washington for the next two years.

“These [tech] guys make a lot of money and think they’re brilliant — because they are . . . But that doesn’t transfer to politics as seamlessly I think as they hope,” said a Republican campaign consultant who, like other people who know Thiel, asked not to be named in order to speak about the billionaire more freely.

A successful campaign was like a three-legged stool, the consultant said, with one leg being a good candidate; another being outside money; and the third being party support.

“The kind of ‘donor-owner’ model really anticipates one [leg], which is their money,” the consultant said. “They don’t think about candidate quality because they know them and they think they’re great guys and would be great senators, and that’s the only consideration.”

One longtime associate from the tech world, who shares the billionaire’s political leanings, expressed frustration at Thiel’s political investment strategy, saying that he had been too “professorial” in his political endorsements, meaning that he liked to put forward ideas but did not have clear long-term goals.

Another longtime Thiel associate suggested the billionaire’s personal connection to the two Senate candidates was a significant reason for backing them so heavily, an atypical strategy for choosing candidates in such high-profile races.

Both of Thiel’s candidates are former employees of his: Masters was chief operating officer for the billionaire’s investment firm, Thiel Capital, while Vance worked at his venture capital firm Mithril Capital.

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A spokesperson for Thiel did not respond to a request for comment.

In the 2022 election cycle, Thiel has given more than $30.1mn. That is less than the $54mn donated by Richard Uihlein and $49.6mn given by Ken Griffin, but more than Stephen Schwarzman, who has spent $22mn, according to Federal Election Commission records.

What sets Thiel apart from the rest, however, is the manner in which he has doled out the money, writing the two $10mn cheques a full year before the Ohio and Arizona primaries had taken place in a move intended to pre-emptively deter other candidates from joining the race. He later followed up by giving both men an additional $5mn each.

Previous Republican mega-donors such as Sheldon Adelson, the late casino magnate, were happy to write big cheques to the party fundraising vehicles and leave them to allocate the funds. But Thiel is the trailblazer of a new guard: ultra-wealthy donors who want to pick their own candidates and get involved with running the campaigns themselves.

One Republican fundraiser who has met with Thiel and been to a donor summit organised by the billionaire said she believed he and other billionaires such as Ryan Salame of FTX Digital Markets wanted to take a more hands-on approach to campaigns, hand-selecting candidates with a similar ideological agenda, rather than leaving the strategy to the party leaders.

“They don’t want to just write cheques,” the fundraiser said.

However this strategy has irritated some members of the Republican establishment. They believe Thiel will hurt the party’s chances in the midterms by helping low-calibre candidates win their primaries — both by financially backing them and helping secure the endorsement of Donald Trump — but then decline to put forward the extra money they need to win in the general election.

A RealClearPolitics average of polls shows Masters trailing Arizona Democrat Mark Kelly by 4 points, while in Ohio, a state that Trump won by 8 percentage points in both 2016 and 2020, Vance is up by just 1.5 points against Democrat Tim Ryan, according to the RealClearPolitics average.

Both Thiel candidates have struggled to raise funds. Between July and September, Masters raised eight times less than Kelly, while in Ohio, Ryan raised more than twice as much, according to Federal Election Commission data.

The worse than expected fundraising and poll numbers have raised tensions between Thiel and McConnell over who should be left funding the two candidates for the rest of the race, according to Republican donors and strategists.

McConnell has publicly lamented the lacklustre quality of this year’s party candidates. While Thiel had expected the Republican party establishment to pick up the cheque for the remainder of the election, McConnell argued that Thiel, who had handpicked the candidates, should be the one to carry them over the finish line.

According to one person with direct knowledge of the donor’s reaction, this came as a surprise to Thiel. McConnell and the Senate Leadership Fund, the super political action committee linked to him, declined to comment.

In September, the Senate Leadership Fund cancelled more than $17mn in reserved Arizona television ads, amid reports that McConnell was pressuring Thiel to put more money into the race. Last week, US media reported that Thiel had agreed to put an additional $5mn into Masters’ campaign.

At the National Conservatism Conference in Miami last month, Thiel publicly alluded to his ideological differences with other members of the Republican party, acknowledging that the movement was not in lockstep. “We’re not some sort of, you know, hippie-dippie, Burning Man camp . . . The diversity is extreme.”

How Vance and Masters perform in the midterms is likely to alter Thiel’s political strategy. He has already examined the possibility of taking a different route by giving more money through a C4 non-profit, which obscures the origins of the campaign donations, according to one person briefed on his plans.

A bruising loss in Arizona might convince Thiel to sit out the 2024 presidential race, though he could be tempted back if sufficiently enamoured by a particular candidate, the person said.

“I suspect he’ll say he’s not going to write cheques any more — and then he’ll want to go with some candidate to the presidential and write a $50mn cheque,” he added.