30 Apr 2013, 2:33pm
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VC Chamath Palihapitiya Attempts to Shame Entrepreneurs Once Again

In an interview at TechCrunch Disrupt yesterday venture capitalist Chamath Palihapitiya said the tech world at large should be ashamed for being “at an absolute minimum in terms of things that are being started”. Venture capitalists telling founders they should feel badly about the work they pour every waking moment into isn’t exactly endearing, and several readers reached out anonymously to express their dismay at the hyperbole and hypocrisy of this statement. It turns out this blatant cry for attention might not be good for deal flow either.

My Take: Palihapitiya’s perceived dearth of high quality startups should hardly be taken as an indictment of the broader tech sector, and is more likely a reflection founder’s hesitation to work with him following the Airbnb email debacle.

This is not the first time Palihapitiya has attempted to publicly shame founders. In a leaked email from October 2011 (allegedly forwarded by an assistant, later denied) he railed against Brian Chesky’s decision to give founders the option to take money off the table, but not offering employees the same deal. While the intent to get liquidity for early employees is commendable, the tone of the message and the fact that it was leaked publicly amounted to a public shaming and undermining of Airbnb’s CEO. Certainly not the kind of behavior founders should expect or tolerate from investors in general, and in their own company (in Airbnb’s case) at all.

According to Crunchbase, AngelList and other publicly available investment data he has yet to make a new co-investment in the same round with Andreessen Horowitz, who lead the round with Airbnb, or any Y Combinator companies (of which Airbnb is an alum). While no investor would ever share who ends up on their “blacklist”, it will be interesting to see if this pattern continues to hold up over time.

Actions, Not Words

When an investor calls out the industry for a lack of quality, the natural reaction is to look to his portfolio for the diamonds in the rough he has discovered. I was surprised to learn that Palihapitiya was one of largest investors in tragically mismanaged startup Ecomom, where his wife Brigette Lau served on the Board of Directors.

But perhaps the rest of the portfolio of his allegedly $275M fund (regulatory filings have not yet be updated to reflect the actual amount closed) has fared better. Let’s take a look at his personal investments and Social + Capital portfolio and, assuming his current investments were excluded from his sweeping derision of tech startups, get a sense of which companies made the cut:

Photo Credit: TechCrunch

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I see what u did there

So, you’re trying to say that a credible investor asking us to think bigger is wrong and you should dig deep into his past so you can find a black spot and blow the fuck issue out of it?

So, let’s look at your past, Danielle?

You started a shitty start-up called Referly. Which became a Zombie startup. You took money from investors and instead of being busy atleast attempting to think of a profitable plan for your pivot, you spend your time consolidating lists and writing shit about people you passionately hate.

Honestly, comparing both of your histories, I think the investor is much much better and far more credible than you are.

I hope you someday attain that credibility, atleast a remotely significant percentage of it, if not.

30 Apr 2013, 8:33pm
by Chamath Palihapitiya

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Hi Danielle, this is Chamath. Thanks for writing your thoughts transparently. Here are a few things that may be worth noting:

1. when i was at facebook, i had the honor of investing in playdom and making a lot of money when we sold it to disney for $750M. i then promptly began angel investing. along the way, i was lucky enough to get the support of a fund who gave me backoffice support. i have repayed this favor to three people who are/have worked at facebook and are active angel investors. not only does my fund provide support for them, i also allow them to allocate small amounts of our capital so that they can increase their exposure to companies they think are worth supporting – i don’t judge or opine on their investment – just support. these are predominatly the companies you see on crunchbase. many of my primary direct investments are not reflected in your list but most of the angel investments are.

2. the total amount of my two funds is $600M

3. we, according to Cambridge, who judges the returns of all funds show us in the top 5% of all funds over the past 3 years even though we’ve only been around for less than 2.

4. we were part of more than $2B of liquidity last year alone. specifically, this was Yammer ($1.2B sale to MSFT), BazaarVoice IPO ($500B), Cove sale to Dropbox (>75M, 75M, <100M). GoInstant sale to Salesforce (>75M, <100M)

in general, i'm pretty sure i will make a disproportionate amount of the returns in my venture fund – we have done so already and will continue to do so – that is what folks who are good at what they do, do – they win.

the point, however, is not about returns, the point is about progress. more generally, i spend my time investing in things that i think need to exist vs things that are about momentum, follow-on investing. things in genetics, cancer research, drones, new age batteries etc. i'm not sure if these things will work, but i'm sure that if they do, the world is a more interesting, meaningful place for more people. that is my goal and my point about my comments. many times, i feel alone in the investments that i make – i would love it that there are others doing the same – not focused on simple ways to make a salary but the concept that capital is there as a mechanism to help effect change and progress.

you may react cynically to this, but i suspect this was the reason you came to the Valley in the first place. i'm not sure how your company is doing but if you want some big ideas of things that can help hundreds of millions of people and where you can make a ton of money for you and your employees, let me know and i'm happy to help give you some clues.

good luck.

+1 for Chamath’s well thought-out, and (overly) kind reply to unjust criticism. I’m not a VC, nor do I spend a lot of time with their ilk — but I’m 99% certain that most of them would have simply ignored you.

Investors should focus on, well, investing. If one of these guys has so many great ideas, he should start a company and put them into action, instead of criticizing the people who are out there “doing”.

Being an entrepreneur of any sort is crazy challenging, crazy risky, and more intellectually, emotionally, and physically demanding than anybody – who hasn’t done it – could ever imagine. But yet some people do it… those are the important people in this story, not the VCs and other investors.

I enjoyed this blog far better when it was about building products that consumers love.

Unfortunately, it’s quickly turning into a “STAR Magazine”-style gossip column for Startups. Putting a spreadsheet on it doesn’t make this into a data-driven transparency post (did it really need to mention the wife?)

It comes across as written by someone who has a beef with this VC or is jealous of the startups that were able to raise capital.

Chamath kudos on your response, but I think you’re giving the author too much cred by even bothering to reply.

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[...] the flip side, Chamath’s statement has also been taken too much out of context, with people vilifying him for his hyperbole and hypocrisy. See the video of the conversationĀ  yourself, and you’ll see that he has his heart at the [...]

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As a start up edtech entrepreneur that attended TechCrunch Disrupt I found that Chamath was a breath of fresh air in a self-congratulatory arena wallowing in “me-too” apps and web ventures. Subsequently Chamath has generously given our project counsel and encouragement which has helped us to focus and exponentially increased our prospects of success. My limited experience is that Chamath is practicing what he preaches.

[...] haven’t had returns that were as good as in the 90s. Venture capitalists complain that companies founded today aren’t as innovative as they used to be or that valuations are higher than they used to be. And the press? Writers who have never been [...]

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