Chamath Palihapitiya earmarks $3 billion for new fund that lacks crypto

  • The planned $3bn fundraise comes after the venture capital firm, Social Capital, was largely closed to outside investors for about four years.
  • Up to 70% of the capital of the new vehicle is dedicated to its first 10 positions

In an unexpected move to start accepting outside capital again, Chamath Palihapitiya is seeking to raise at least $3 billion for its latest venture capital fund, according to two sources familiar with the matter.

But this time around, the longtime crypto bull doesn’t plan to give digital assets much play. Palihapitiya’s Social Capital company has effectively operated as a quasi-proprietary trading company for the past few years, having disconnected a number of long-time investors to focus on investing largely in founder’s capital.

If Palihapitiya is successful, the ambitious multibillion-dollar fundraiser would be his most ambitious achievement yet and perhaps lessen the sting of his PSPC’s latest woes.

The vehicle would be Social Capital’s fifth to date. Past funds, to varying degrees, have taken significant crypto exposures, including the start of buy bitcoin as a company in 2013. The venture capital firm has also backed companies like SuperRare NFT Marketplace and Solana’s Saber Labs.

While digital asset-focused startups — particularly emerging video game and Web3 companies, as well as fintech companies trying to bridge crypto and TradFi — should remain an area of ​​focus, crypto collectively appears to be eclipsed by d other portfolio priorities.

The sources were granted anonymity to discuss sensitive business transactions. The firm declined to comment. Axios reported for the first time Social reopening to outside capital.

Fund V’s main priorities: support promising startups that seek to solve real-world problems related to climate, deep technologies (including machine learning and artificial intelligence) and cloud computing. While Palihapitiya and his team have sometimes highlighted their background in crypto in conversations with potential institutional partners, digital assets seem to take a back seat here.

Although TradFi players have been watching the recent crypto turmoil closely in pursuit of vulture-like risk plays and distressed debt opportunities, it seems few asset managers have actually pulled the trigger. .

That’s true, as in the case of Social, due to uncertainty over the bottom’s call for cash cryptoassets — which impact valuations almost uniformly across the private sector — and reluctance from major potential investors, such as conservative sovereign funds. , to put significant capital to work in space.

In other words, the risk-reward profile is not there yet, in the eyes of some.

Fund V has been kicking off fundraising in recent weeks, with the plan to launch in the first quarter of 2023, at the earliest – subject to fundraising. The fund is marketed as having a 10% general partner commitment, or $300 million, an unusually high allocation in venture capital, where limited partners often complain that portfolio managers don’t have enough personal skin in the fund. Game.

The vehicle is designed to divide its capital into three main tranches of equal weight: $1 billion for start-ups receiving checks of between $10 million and $20 million; $1 billion for early-stage companies, with checks averaging $100-200 million; $1 billion for massive checks of $250-450 million for opportunistic stakes in companies at various stages of development.

Fund V’s top 10 positions are intended to represent 70% of its entire portfolio. The term is 10 years, plus an optional two-year extension, plus a five-year investment period. Social’s management cut is 2% and plans to take 30% carried interest.

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  • Michael Bodley

    Chief Editor

    Michael Bodley is a New York-based editor for Blockworks, where he focuses on the intersection of Wall Street and digital assets. He previously worked for the institutional investor newsletter Hedge Fund Alert. His work has appeared in The Boston Globe, NBC News, The San Francisco Chronicle and The Washington Post. Contact Michael by email at [email protected]

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