Peter Thiel being suddenly cast into the center of U.S. politics in 2016 isn’t something that either Thiel or his longtime friend and colleague Ajay Royan could have anticipated in 2014, when they founded Mithril Capital Management. But it doesn’t change much for the low-flying, 12-person firm, which is based in San Francisco but makes outsize bets on companies that are largely outside of the Bay Area.
In fact, Royan insists that Thiel’s position on President-elect Donald Trump’s transition team had no discernible impact on fundraising for its second and newest fund, which the firm just closed with $850 million, including management fees.
“It’s been interesting,” Royan says of Trump’s divisive win. “As observers, we’re fascinated by what’s going on; there seem to be a lot of issues that are conflated by social media and so forth. But on a day-to-day basis, what we think about and what we do hasn’t changed at all. Maybe if we were more Silicon Valley focused, we might feel it more. My social media feed is more activated around the [election results] than my business relationships.”
Some of those business relationships center on Mithril’s investors, many of which are recognizable family offices in the U.S., Europe and Canada. Though Royan declines to name them publicly, they’re limited enough in number than he spends a couple of hours with each every quarter, rather than host a formal annual meeting.
“Having a small base allows you to give people individual updates,” he says. “We can talk about the fullness of their business and the fullness of our business.”
They have plenty to discuss, surely. Mithril, which closed its first fund with roughly $540 million, has now invested in 22 companies, including the data analytics company Palantir, cofounded by Thiel; C2FO, a nine-year-old, Kansas City-based collaborative cash-flow optimization company that tries unlocking capital trapped in trade relationships; Adimab, a 10-year-old, Lebanon, New Hampshire-based antibody drug discovery startup; and a nine-year-old, Redwood City, Ca.-based surgical robotics company called Auris Surgical Robotics, whose founder Royan gleefully describes as having the “energy of 99 founders.”
(That founder, Dr. Frederic Moll, has cofounded several companies previously, including Intuitive Surgical, a 20-year-old, publicly traded company that makes robotic surgical systems and is valued at $25 billion.)
Mithil doesn’t have any exits to speak of yet, but investors sign up for a portfolio that’s fairly concentrated. Its debut fund committed $100 million to one (undisclosed) company, for example, and its median check size is $50 million. (Royan says that Adimab has now received more investment from Mithril than any other company it has funded. Wired profiled it last year.)
Investors also agree to a longer-than-usual ride with Mithril, whose funds have 12-year-long investing periods, giving Royan and Thiel the flexibility to make bets in established companies that aren’t yet ready to go public.
For example, C2FO is now clearing a billion dollars in transaction volume every day, up from a billion dollars every quarter in 2014, when Mithril invested in the company. Yet asked if an IPO is in sight for 2017, Royan says C2FO has no plans to go public yet and that he generally believes there should be a “line of sight to saturation” before an outfit starts talking with investment bankers.
“You want the public markets to have the confidence that yours in the last company in its category that they need to be thinking about,” he explains.
Royan also holds up C2FO as the kind of company that Mithril pursues in part because it’s outside of Silicon Valley. “I love that I have to be in Kansas City five times a year,” he says, speaking from Mithril’s sleek offices in the leafy Presidio, a former military base turned national park.
Kansas, he says, is among many places where individuals, including founders, can have a very different perspective and life experience than that of the “top-notch MIT grad or Stanford grad who lives in San Francisco or a place that consciously or unconsciously looks like it, including parts of Boston, large parts of New York — even Berlin, Stockholm and London, which very much have a Silicon Valley state of mind.”
I ask Royan if, as Thiel has suggested, he thinks Silicon Valley — where Mithril has funded seven companies altogether — has become too disconnected from the rest of the country.
Already, one Mithril employee, J.D. Vance, has moved back to his home state of Ohio in what appears to be the launch of a political career. (He remains with Mithril but isn’t very active, says Royan.) Meanwhile, another Mithril partner, Jim O’Neill, is reportedly being considered for a post as the head of the Food & Drug Administration at Thiel’s urging.
O’Neill declines to comment on whether he was or remains under consideration for the role.
Royan meanwhile suggests he has been too busy to give much thought to the Trump administration — then offers some thoughts about the Trump administration.
“Maybe it’s a function of [my spending] so much time elsewhere, but the rest of the country’s reaction [to Trump] has been quite different than [locally]. In Oak Ridge, Tennessee; in Kansas City; in parts of Washington outside of Seattle; or even 60 miles east of San Francisco, I’ve never seen more hope invested in a new administration, maybe barring the first election of President Obama.”
Royan says he has no “specific policy views.” But he does thinks that a Trump win has “created more room for action and to try things.”
Whether what the President-elect “tries is right remains to be seen,” Royan adds, but new approaches are worth trying. “Economic progress [hasn’t] come to the majority of the country,” and Silicon Valley’s thinking around universal basic income “isn’t going to solve that problem,” he says. “It removes agency from individuals. And you need to give individuals more agency, not less.”