Chamath Palihapitiya is the founder of the venture fund Social+Capital Partners. But he says “I’m trying to be as un-VC as possible." The young investor wants to shake up what he believes is a broken system, which is crippled by short term thinking and a lack of transparency.
“Venture capital firms tend to focus on having large amounts of assets under management and collecting fixed fees,” says Chamath. “That creates perverse incentives because you’re focused on deploying as much capital as fast as possible. I want to be antithetical to all of that.”
Having founded the firm in June, after leaving his role as Vice President of User Growth, Mobile and International Expansion at Facebook, the first fund for the Social Capital Partnership has raised over $300million with around $60million put in from Mr Palihapitiya himself. Chamath started putting that money to good use by investing $17million in popular enterprise social network company Yammer Social+Capital has also recently invested in another rising firm, SecondMarket, a platform which allows shares in private companies can be exchanged.
His salary is fixed and he earns no bonus, all to insure that his annual pay does not depend on the amount of capital accumulated, like in other firms. That is the typical structure and Chamath wants to change that as it encourages fund managers into chasing big fund-raising rounds and to only look for deals with quick exits.
The present outlook “is too tilted towards current compensation versus long-term capital gains,” explains Mr Palihapitiya.
The current investing environment is very competitive and every VC is hungry to find the next Facebook or Google and with startup founders hungry for investment many VC's can try and get away with financing terms which don't make sense for the founders.
Trying to get away from the old and bring in the new he has replaced the usual look of pressed khakis and button-down shirt, with a more casual jeans and flip flops. A small change that expresses his goal of changing a old stale industry and it's unwritten rules with new ones. It is happening in many industries now as the next generation come through and enter senior management roles or start their own businesses. If you're at the forefront of that change you can be very successful.
Although a tough mission his investors have faith in him, “I trust his vision and his expertise,” said Mr. Hewitt, the founder of Firefox. “There’s a lot of fluff out there, and Chamath is good at rooting out the bull.”