One of Silicon Valley's most outspoken investors has decided he doesn't want to be a traditional venture capitalist
- Chamath Palihapitiya told his employees he would be diverting much of the "carry" — the portion of investment returns traditionally given to venture capitalists — back into the company.
- The comments shed light on a tumultuous few months for Social Capital. It's lost a handful of executives, spurring speculation about a mass exodus.
- Palihapitiya seemed unconcerned about the exits
Chamath Palihapitiya, one of Silicon Valley's most outspoken investors, has decided he doesn't want to be a traditional venture capitalist.
The founder of Social Capital has adjusted the firm's investor payouts and sought to advance the company beyond "Stanford MBAs in fleece vests," Palihapitiya said in an interview with The Information.
In a blog post on Medium, Palihapitiya explained that the firm would no longer accept outside investment from limited partners, and would instead act like a "technology holding company," making investments in tech companies with no particular timeline for delivering a return. Palihapitiya was an early Facebook employee and has a considerable personal fortune, which he's invested in a variety of businesses, including part ownership of the Golden State Warriors NBA team.
Traditional VCs typically raise funds from multiple limited partners, then attempt to deliver value on those funds in a 7-to-10 year time window. This model has been criticized for encouraging start-ups to sell or go public early, although in recent years the opposite has been true, as highly capitalized start-ups have stayed private for many years while their private valuations soar.
Earlier this year Palihapitiya told Social Capital employees he would be diverting much of the "carry" — the portion of investment returns traditionally given to venture capitalists — back into the company. The employees would get shares in Social Capital instead, he told The Information.
"I don't need the external validation. I don't need the fees," he said. Venture capital doesn't mean "Stanford MBAs in fleece vests running around. Venture capital means money for ventures."
The comments shed light on a tumultuous few months for Social Capital. It's lost a handful of executives, spurring speculation about a mass exodus. Palihapitiya seemed unconcerned about the exits, telling The Information he would "rather spend time with the people that are 100% aligned with what I want to do" and commenting on investors feeling ignored with simply: "Tough."
Read the rest of the interview at The Information.