His comments come as Thiel, co-founder of PayPal and part-time partner at Y Combinator, donated $1.25 million in support of Republican U.S. presidential nominee Trump.
Though Thiel already vocally supported Trump, his donation sparked ire as it followed Trump's inflammatory comments toward women. Footage of Trump making explicit remarks about women was revealed earlier this month in a 2005 tape.
Sam Altman, president of Y Combinator, tweeted that while he felt that Trump was "abusive" and "unfit to be president," he would not fire anyone for supporting a major party nominee. The decision was criticized by Ellen Pao, co-founder of Project Include, who made headlines for a discrimination lawsuit against her former employer, venture capital firm Kleiner Perkins Caufield & Byers.
"We agree that people shouldn't be fired for their political views, but this isn't a disagreement on tax policy, this is advocating hatred and violence," Pao wrote in a blog post.
Mary Meeker of Kleiner Perkins Caufield & Byers joined Palihapitiya at the summit, saying that she's thinks people are entitled to their opinions and should avoid knee-jerk reactions.
"Democracy is agitated," Meeker said. "When a baseball player says, 'I'm potentially going to run for office,' that's actually good. I actually think the Donald Trump stuff, it has raised an issue, most recently, that is really important to our society. It has made the debate much more intense and it has made people reflect a lot more.... I'm hopeful we're going to end up in a better space."
Meeker noted that during future presidential elections, candidates histories will be documented on platforms like Facebook. Thiel is also board member of Facebook, and CEO Mark Zuckerberg addressed Thiel's position in a post authenticated by CNN Money.
"There are many reasons a person might support Trump that do not involve racism, sexism, xenophobia or accepting sexual assault," Zuckerberg reportedly wrote, adding: "Our community will be stronger for our differences."
To be sure, Palihapitiya was set up with a question calling Trump, a "misogynist" and "awful human being with small hands." CNBC has reached out to the Trump campaign for comment.
Aaron Levie, co-founder and CEO of enterprise cloud company Box, said at the summit that he thought Altman and Zuckerberg were in a difficult position. Levie has been outspoken on controversial issues, such as laws that would force transgender students to use restrooms and other facilities inconsistent with their gender identity.
"I do agree, to Chamath's point, that it's a personal decision," Levie said. "I think based on my sort of views of this election, and how significant it is for the country, at the minimum it would be good to do a temporary pause on the relationship."