Chamath Palihapitiya Allocates $3 Billion For New Crypto Fund

According to two people with knowledge of the situation, Chamath Palihapitiya is seeking to raise at least $3 billion for his most recent, top-heavy venture capital fund in an unexpected decision to resume taking outside funding.

However, the seasoned crypto bull has no plans to play much with digital assets this time around. Since cutting ties with a number of old investors to concentrate on investing primarily founder capital, Chamath Palihapitiya’s company Social Capital has effectively operated as a quasi-proprietary trading firm.

If Chamath Palihapitiya succeeds, the multibillion dollar fundraising effort would rank as his most ambitious success to date and potentially lessen the blow of his most recent SPAC.

This would be Social Capital’s fifth vehicle overall. Previous funds have taken significant cryptocurrency exposures to varying degrees, starting with the firm’s 2013 purchase of bitcoin.

Chamath Palihapitiya has also supported companies like Solana’s Saber Labs and NFT marketplace SuperRare

While fintech companies attempting to bridge crypto and TradFi, as well as upcoming play-to-earn games and Web3 companies, should continue to be a focus, crypto generally seems to be overtaken by other portfolio priorities.

Anonymity was granted to the sources so they could talk about private business affairs. The business chose not to comment.

Supporting potential entrepreneurs trying to address real-world problems in the fields of deep technology (such as machine learning and artificial intelligence) and cloud computing is one of Fund V’s top focuses. Although Chamath Palihapitiya and his team have occasionally emphasized their experience with cryptocurrencies in discussions with potential institutional limited partners, it seems that digital assets are taking a backseat in this situation.

While TradFi players have been closely monitoring the recent upheaval in the cryptocurrency market in search of vulture-style venture plays and distressed debt opportunities, signs suggest that few asset managers have actually made a move.

That is true, as it is in Social’s case, because it is difficult to predict when spot cryptoassets will reach their bottom, which almost always affects valuations in the private sector, and because top potential investors, like conservative sovereign wealth funds, are reluctant to invest significant sums of money in the market.

Fund V just began its fundraising efforts with the goal of launching at the earliest in the first quarter of 2023, subject to funding. A 10% general partner commitment, or $300 million, is being touted for the fund. This is an exceptionally high allocation in venture capital, where limited partners frequently complain that portfolio managers don’t have enough personal stake in the company.

The vehicle’s capital is intended to be distributed across three equal-weighted primary categories: $1 billion for massive checks of $250 million to $450 million for opportunistic stakes in businesses at various stages of development; $1 billion for late stage companies receiving checks averaging $100 million to $200 million; and $1 billion for early-stage businesses receiving checks between $10 million and $20 million.

A stunning 70% of Fund V’s entire portfolio is allocated to its top 10 positions. The tenure is for 10 years, with a possible two-year extension and a five-year investment period. Social will retain 30% of carried interest and take a 2% management cut.

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