Chamath Palihapitiya earmarks $3 billion for new crypto-light fund

In an unexpected move to start accepting outside capital again, Chamath Palihapitiya wants to raise at least $3 billion for its latest top-heavy 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 firm Social Capital has effectively operated as a quasi-proprietary trading firm in recent years, having pulled the plug on a number of long-time investors to focus on investing mainly founder capital.

If Palihapitiya pulls it off, the ambitious multibillion-dollar fundraise will go down as his most ambitious achievement to date and perhaps ease the sting of his latest SPAC problem.

The vehicle would be Social Capital’s fifth to date. Previous funds have taken significant crypto exposures to varying degrees, including starting to buy into bitcoin as a firm in 2013. The venture firm has also backed the likes of NFT marketplace SuperRare and Solana’s Saber Labs.

While digital asset-oriented startups – particularly emerging play-to-earn and Web3 companies, plus fintech firms trying to bridge the gap between crypto and TradFi – should remain one area of ​​focus, crypto collectively appears to be overshadowed by other portfolio priorities.

Sources were granted anonymity to discuss sensitive business matters. The firm declined to comment. Axios first reported on social reopening for external capital.

The main priorities for Fund V: support promising startups that want to solve real problems across climate, deep technology (including machine learning and artificial intelligence) and cloud computing. While Palihapitiya and his team have at times played up their crypto track record in talks with potential institutional limited partners, digital assets appear to be making a comeback here.

Although TradFi punters have been closely watching crypto’s recent turmoil in pursuit of vulture-style venture plays and distressed debt opportunities, it suggests few asset managers have actually pulled the trigger.

That’s true, as it is in Social’s case, because of an uncertainty about calling the bottom for spot crypto assets — which almost uniformly affects valuations in the private sector — and a reluctance from potential top investors, such as conservative sovereign wealth funds. to put significant capital to work in the space.

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

Fond V started fundraising in recent weeks, with the plan to start in the first quarter of 2023 at the earliest – depending on 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 game.

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

Fond V’s top 10 positions are earmarked to make up as much as 70% of the entire portfolio. The term is 10 years, plus an optional extension of two years, together with an investment period of five years. Social’s management cut is 2% and plans to take 30% of the carrying rate.

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