Welcome to another edition of Business Twitter, where we collect the best tweets to come out of Silicon Valley so you don’t have to. This article is part of a newsletter — if you want a weekly Business Twitter roundup sent to your inbox every Friday, subscribe here.
This week: Peter Thiel’s $5 billion Roth IRA, Anthony Pompliano’s tax loopholes, resources to fund a pre-seed round, and Confluent’s stellar IPO.
1. Thiel’s $5 billion Roth IRA
One of this week’s biggest stories involved billionaire investor Peter Thiel, who turned out to be a little richer than once thought. According to a story (and Twitter thread) by ProPublica, Thiel has been keeping a stash in a Roth IRA since 1999. To date, it’s grown to $5 billion, far more than the average American’s Roth amount, which hovers around $150,000 after 10 to 19 years, according to NerdWallet.
Thiel was within his legal rights to create the IRA at the time, but instead of putting in cash, he put in $1,700 in shares of his then-new startup, PayPal. One year later, that $1,700 in shares grew to $38 million as PayPal became one of the biggest companies in Silicon Valley. And it just kept growing since.
Many people were shocked by the sheer size of the untaxed nest egg, including Banana Capital founder Turner Novak, who tweeted, “With the gains on his Roth IRA, Peter Thiel could give $1 million to every American and still have money left over. Really makes you think.”
Ben Carlson, financial analyst and podcast host, also crunched some numbers to get his head around the Roth’s size. “If you invest $2k every year into a Roth IRA for 1,267 years and earn 5%/year you too can build $5 billion of tax-free wealth like Peter Thiel,” he wrote. “You just have to think and act for the long-term*...*and be a vampire.”
2. Pomp’s tax tricks
Anthony Pompliano took some inspiration from Thiel’s tax-free saving methods and analyzed some other billionaires’ methods of lowering their effective tax rates.
Pomp started out his Twitter thread by writing, “Between 2014 and 2018, Warren Buffet reported $125M in income. His effective tax rate was only 18.9%. Buffet, Bezos, Elon, and other wealthy Americans use the tax code to their advantage and keep more of their $$ to invest. Here are a couple of their tricks you can use.”
(Perhaps Pompliano was typing quickly, and forgot the extra "t" on the end of Buffett.)
According to him, one of the easiest ways to lessen your tax burden is to contribute to your retirement account. “There are two main types of IRAs — Traditional IRAs and Roth IRAs,” he wrote. “While both are tax-efficient, Traditional IRAs lower your taxable income NOW while Roth IRAs reduce your tax burden LATER. The best part? You don't have to pay capital gains taxes when you trade in either.”
3. Pre-seed funding resources
Yohei Nakajima, general partner at Untapped Capital, shared some fundraising tips for founders looking for that ever-elusive pre-seed round in a recent Twitter thread.
As it turns out, there are plenty of angel investors who don’t require a warm intro to meet with entrepreneurs. Nakajima provided several links to funds, angel investors, and tutorials on how to build your own target investor list.
Nakajima also added some advice: “Make sure you're writing personalized outreach, not the same blast to everyone. This just hurts everyone, including other founders.”
4. Confluent’s IPO
This week was a good one for VC firms as a handful of successful IPOs made substantial returns on investment. For both Benchmark and Index Ventures, Confluent’s public debut meant that each firm’s shares became worth more than $1 billion. The cloud software company raised $800 for its Thursday debut, bringing its valuation to $11.4 billion.
Reporter Ari Levy, who covered the story for CNBC, quoted Jason Lemkin, tweeting tongue-in-cheek that “it’s about time Benchmark caught a break.”
Lemkin, who serves as managing director of SaaStr Fund, replied: “A real unicorn isn't a $1B valuation,” he wrote. “It's a $1B position.”