Chamath Palihapitiya, a prominent venture capitalist and co-host of the All-In Podcast, was once at the pinnacle of the business world. He gained significant wealth from Facebook’s public offering and built a successful venture capital firm, Social Capital. In late 2020, Palihapitiya was actively promoting SPACs (Special Purpose Acquisition Companies) on CNBC, further solidifying his reputation in the financial sector.
During the SPAC boom, Palihapitiya’s company reportedly earned around $750 million by charging substantial fees for taking companies public through SPAC mergers. However, recent developments suggest a significant downturn in his fortunes.
Social Capital has experienced a mass exodus of key personnel, including the Chief Financial Officer and General Counsel. Palihapitiya’s attempt to raise a new venture capital fund from external limited partners failed, leading to further financial strain.
Several of Palihapitiya’s investments have suffered substantial losses. Clover Health has declined by 90% since going public, ProKidney Corp by 59%, and Akili by 96%, resulting in losses amounting to hundreds of millions of dollars. Additionally, Social Capital invested $220 million in Palmetto Clean Technology.
Forbes has not listed Palihapitiya as a billionaire since the SPAC frenzy in 2021. While he remains wealthy by conventional standards, much of his wealth is tied up in private investments, potentially causing liquidity issues. On the All-In Podcast, Palihapitiya has discussed reducing household spending and even sold his private jet, opting to fly commercial.
Social Capital’s first three venture capital funds, backed by external limited partners, continue to generate management fees and will produce returns as portfolio companies exit. However, Palihapitiya’s request to increase these management fees was denied.
The decline of Palihapitiya’s professional relationships is evident in two significant breakups at Social Capital. In 2017, co-founders Mamoon Hamid and Ted Maidenberg left following a dispute with Palihapitiya. He retroactively limited their carried interest, leading to a private arbitration that ruled in his favor, citing his authority to amend compensation under the firm’s limited partner agreement.
More recently, Palihapitiya fired partners Jay Zaveri and Ravi Tanuku over a special purpose vehicle (SPV) related to the AI startup Groq. While the official reason was the potential exclusion of the fund from a deal, some former employees suspect it was an excuse to deny carried interest. The resignation of General Counsel Robert Goldstein and CFO Connor Nowinski further underscores the turmoil within Social Capital.
Palihapitiya has consistently emphasized his control over his companies, preferring to handle employee issues without a formal HR department. Instead, he relies on respected third-party law firms for serious matters.
In his latest investor letter, Palihapitiya acknowledged the challenges of 2023 and highlighted the disruptive changes from advancements in AI and the reshoring of critical industries. Despite recent setbacks, he remains engaged in navigating the evolving business landscape.