Social Capital, the controversial firm that has seen a staff exodus in recent months, boasted on Wednesday of an cumulative net IRR of 18.6 percent in an annual letter penned by co-founder Chamath Palihapitiya.
The release of the figure was accompanied with a warning to VCs that massive funds, such as SoftBank‘s Vision Fund, were pumping too much capital into startups.
The reported return covers the years since the firm’s founding in 2011 to September 2018. According to Palihapitiya, it amounts to a 31.3 percent gross IRR, which then translates into the net IRR after fees.
It also applies to LPs who invested equal amounts in each of the firm’s four funds.
It also excludes the performance of additional large investments: those into the Golden State Warriors, where Palihapitiya is a part owner, Amazon and Bitcoin. These investments were not made from the private funds and performed at an annualized IRR of 75.2 percent over the same period, the letter states.
The letter goes on to reiterate Social Capital’s new strategy as a technology holding company investing from its own balance sheet and closed to new investors.
Palihapitiya said in the letter that when the firm accepted LP capital, family offices made up 80 percent of its investors, with his own family office the largest.
He also warned that large funds are supplying an abundance of cash to startups and paying up for growth at a time when “the dynamics we’ve entered is, in many ways, creating a dangerous high-stakes Ponzi scheme.”
He added: “We believe it’s time to wait patiently as the air is slowly let out of this bizarre Ponzi balloon created by the venture-capital industry.”