SG 2016: Chamath Palihapitiya, Deconstructor at S23P

Stop and imagine this dystopia for a moment: in a world of over 7 billion people, the centers of power are calcified and society is led by those who are “smart enough to be greedy, but not smart enough to be useful.”

The education industry inflates prices every year to pay for new administrators rather than better teaching, yet continues to thrive despite the decreasing value of a degree - and the decreasing usefulness of the skills with which graduates leave.

The healthcare industry is a behemoth bureaucracy, putting legacy systems and big pharma interests ahead of patient privilege and opportunities for meaningful innovation.

The finance industry pushes paper, moving, speculating on, and even risking value rather than creating it.

This society is breaking at the seams, no one one trusts the powers that be, and the only innovative solutions this society comes up with are rehashes of stuff that was cool in 2003.

Doesn’t sound like such a nice place to live, right?

As a reformed banker turned technology entrepreneur and impact venture capitalist, Chamath Palihapitiya, founder of Social+Capital Partnership, would agree - with one added point: he’s not going stand for it.

The thesis of S+C is simple: deconstruct calcified centers of power with technology.

The fund makes diverse investments, from enterprise tools to social networks, but at the core is driven by a mission Chamath voices with passion: people are frustrated and suffering, and they’re angry at the distribution of wealth and power. In the world of S+C, learning surpasses education and merit surpasses certification. In health, informed, personalized prevention surpasses standardized treatment. And in finance, S+C leads by example: “We should use our money to destroy these powers,” says Chamath.

Want to hear just how S+C is raging against the machine? Now’s your chance. 

Startup Grind is proud to be hosting Chamath Palihapitiya at the Startup Grind Global Conference in February.

Want a taste of the discussion to come? See Chamath at Startup Grind in Silicon Valley this Thursday.

Prestige, Power, and Platforms

A son of Sri Lankan immigrants who fled to Canada to escape civil war, Chamath jumped into a technical education to “make it” in his new world, immediately graduating into finance. To his proud parents, he was a great success: from great school to great job, the Palihapitiya family accomplished every immigrant’s dream of success and security. But despite needing the money, Chamath wouldn’t let banking devour his soul, quitting being a “sellout” to party with 6 22-year-olds.

Well, not just any party: he joined the early Winamp team in launching and promoting what has become one of the world’s most popular music players, later acquired by AOL. During his time at Winamp, his team built Nutella, which became the foundation of LimeWire and Kazaa, simultaneously teaching Chamath about disruptive technology platforms and launching a massive attack on the music industry. It would be his first strike against those calcified powers.

Despite leading the wildly popular AIM and ICQ platforms, it was easy to get bored at AOL post-acquisition. It was be good timing to jump on another passion project. Instead, Chamath remembers turning down Sean Parker’s invitation to join Facebook in 2005, opting to serve a few painful years as venture investor at Mayfield Fund:

“They key is, you build for people, you try to destroy these hierarchically defined centers of power, and if you do it, you get rewarded. So that has been this sort of mantra, and every time I didn’t listen to that intuition, I made a mistake.”

He quickly course-corrected, joined Facebook, and made a meteoric impact on Facebook’s growth - as well as its values. He began making angel investments even before Facebook’s IPO, including investments in Playdom (bought by Walt Disney) and Bumptop (bought by Google). With his own capital and the support of Silicon Valley legends like Peter Thiel, Chamath started Social+Capital Partnership, today commanding over $600M in assets. With portfolio companies like Slack, Sprig, Wealthfront, and Hinge on a tear, it's looking like a good year coming.

Chamath’s Top 10 Tips for Entrepreneurs & Investors

Through both success and failure, Chamath has an encyclopedia’s worth of advice for entrepreneurs -- but above all, remains humble to new lessons. To whet your appetite for the fireside chat, we’ve crawled the internet for his best advice:

  1. Build for size or love. Want a career like Chamath’s? He argues the best entrepreneurs follow one of two tracks: they attack a huge, valuable market opportunity to solve a big itch; or they fall in love with building something something they want to see exist in the world.

  2. Knowledge is about skills, not degrees. Trillions of dollars will be reallocated in the move to self-study and labor competition caused by increased access to knowledge on the internet. If you haven’t already, learn to code.

  3. Invest in the future - that is, in Bitcoin. Chamath is bullish on cryptocurrencies, calling it “Gold 2.0” Most of all, he admires finance that operates outside of central stakeholders. It’ll be especially important in places where money is weak or vulnerable to radical inflation.

  4. Investable entrepreneurs are a work in progress. Chamath likes founders with a fearless naivete, a lot of care for the problem they’re working on, and a deep curiosity. Of course, they have to be coachable and it has to be a good market.

  5. Chase the problem, not the prestige. What do Google, Uber, Twitter, Facebook, and SpaceX have in common? First of all, their valuations compete with the GDP of nations. More importantly, they’ve never participated in an accelerator program like Y Combinator or Techstars. Instead, they relentlessly focused on attacking a problem. Chamath advises the same.

  6. Look outside of Silicon Valley talent. Whether in Silicon Valley or Shanghai, regulations can hurt innovation, even when you’re not AirBnB or Uber. How? Take immigration, another of Chamath’s passion projects: America is getting its ass kicked by Xiaomi and Alibaba in China, Flipkart in India - and the real giants are just getting started. Wouldn’t it be nice to have these brilliant builders and hackers crafting the next Apple here in the US? Too bad we keep kicking the best minds out, even after we educate them. His big prediction: in 30 years, 30% of global GDP will be from tech. 50% of companies of this 30% will be from outside of USA.

  7. Keep a close eye on legislation. S+C has done a lot of healthcare investments. It’s not because they’re specialists, but because they actually read the Obamacare documents -- and realized it created $5 TRILLION of opportunities. These opportunities will keep happening -- watch for them.

  8. Build your dream team. To the S+C partners, that looks like this:

    1. One kickass developer.

    2. Another kickass developer so they can bounce technical issues.

    3. A technical operations person with some organizational experience.

    4. A hustler with a TON of energy.

  9. Seek out the crazy ones. S+C meets many investments through referral - with a very special calling card: “We tried to tell folks, find me the craziest thing you can, find me the entrepreneur that’s the most frustrated right now with the inability to raise capital because they’re not saying what other people want to hear - send that person to our doors.”

  10. And my favorite of all, Line projects up for success. When S+C sees a healthcare problem, they don’t always wait for a company to come to them - they get started. Chamath calls the Mayo Clinic to line up partnerships and fellow partner in crime John Doer calls the US Government office responsible for healthcare regulations. With connections like these, all they need is an entrepreneur to run it.