[ad_1]
Chamath Palihapitiya has been the leader in Facebook's user growth during its founding years. Mike Windle / Getty Images for Vanity Fair
In the last two months, companies and information companies Fortune at Axios, were close behind Chamath Palihapitiya, a billionaire from Silicon Valley who made a fortune during his early years on Facebook (but is now an open critic) and the surreal drama in his venture capital firm, Social Capital .
Since June this year, several senior Social Capital executives, including two co-founders of Palihapitiya, have resigned following irreconcilable disagreements with Palihapitiya leaders.
Yesterday, Mr. Palihapitiya gave a highly anticipated interview to The Information to share his story of the crisis that lasted several months in his company. And then, he shocked the world of venture capital with an unusual closure: the social capital will not collect more funds like a typical venture capital company.
Who is Chamath Palihapitiya?
Chamath Palihapitiya was the leader of Facebook's growth from 2005 to 2011. Under his responsibility, the monthly number of Facebook users has multiplied by 150 (from 5.5 million in 2005 to 845 million at the end of 2011). But after fostering this astronomical growth, he pulled out of the Facebook user base, accusing the social media platform of "tearing up" the company.
But Facebook has certainly made him a rich man. After Facebook's release in 2012, Palihapitiya's equity in the company was estimated at nearly $ 1 billion.
With that money, he founded Social Capital with an idealistic mission to "advance humanity by solving the world's toughest problems," according to the company's website.
What is the particularity of social capital?
In addition to Social Capital's good ideas on philanthropy and social responsibility, the firm also sets itself apart from other venture capital firms through its highly data-driven investment approach.
Traditionally, start-up investments largely depend on the venture capitalist who conducts the transaction – his area of expertise, his risk tolerance and sometimes his personal relationships with entrepreneurs can all influence a decision to invest. capital risk. But social capital has been the first in the industry to use artificial intelligence to select investment objectives.
The company is an investor in Slack, SurveyMonkey and dozens of other startups in the fields of education, business services, health and finance.
So, what has happened?
In August of last year, the Palihapitiya co-founder Mamoon Hamid left Social Capital to join a venture capital firm Kleiner Perkins Caufield & Byers, after a merger agreement between the two companies failed to pass.
In June of this year, Axios and Fortune also announced the disappearance of three partners, including Tony Bates, leader of the largest social capital fund, a $ 1 billion growth fund. The other two were Vice President Marc Mezvinsky and his partner Arjun Sethi.
Social Capital did not comment on any of these departures, but it was thought that the exodus of partners was a direct result of abrupt Palihapitiya changes in the company's strategy.
In an article published on June 11, Mr. Palihapitiya said that he wanted the company to invest in engineering and data companies, rather than creating a diversified exposure by investing in many sectors or by restoring benefits to its partners.
This view seemed consistent with what Capital Capital employees said Fortune at the time – that Palihapitiya would divert much of the "carry" (the portion of return on investments traditionally given to venture capitalists) in the investment firm.
Why was it a big deal?
First and foremost, series departures of senior executives in such a short period of time is a very unusual case of staff turnover, no matter what the measure. And it was amazing how quickly Palihapitiya was losing friends and business partners again after cutting ties with Facebook.
But more importantly, Palihapitiya's strategic shift in social capital is a rare example in Silicon Valley and offers a counter-argument on how venture capital should work.
Traditionally, venture capital companies raise funds from outside investors or what they call "limited partners". These investors may be pension funds, foundations, university funds or wealthy individuals. The job of a resume is essentially to take advantage of that money, investing in start-ups and trying to cash out a larger sum after a period of seven to 10 years. In turn, the VC receives a portion of the profits, plus a fee for managing the sponsors' money.
Critics of this model argue that this approach creates unhealthy incentives for startups to focus more on valuing businesses and finding a solution than building value products for the benefit of society.
What does this mean for the future of social capital?
In Thursday's interview with The Information, Palihapitiya confirmed that social capital would no longer collect outside money. Instead, the firm will function as a "technology holding company," he said in an average post yesterday, to invest in technology companies with no specific timeframe to generate a return.
"I do not need external validation. I do not need these fees, "he told The Information. "[Venture capital doesn’t mean] Stanford MBA in fleece vests that run everywhere. Venture capital is synonymous with money for companies. "
Not surprisingly, more employees are expected to leave.
Source link
