Social Capital reins in ambitious growth-stage investment plans

Social Capital said it reined in its growth-stage investment efforts, pulling back from plans to scale assets across multiple new funds and focus instead on a growth fund to back its own portfolio companies.

In the process, the firm said recent hires Tony Bates and Marc Mezvinsky, brought on to manage the growth efforts, will look for new opportunities outside the firm.

Scaling the asset base, “seemed like a reasonable path in the era of Softbank’s Vision Fund and Sequoia’s rumored mega-fund,” CEO Chamath Palihapitiya said in a blog post. However, as “we got closer to closing some of these new strategies, my gut was telling me to go back to our core.”

The firm said that in turn it decided not to pursue its strategy of raising a credit fund to provide entrepreneurs with a less dilutive form of capital. And it refined its growth strategy to focus primarily on later-stage investments in its portfolio companies, rather than compete in “increasingly excessive growth-stage auctions,” the post said.

The decision to move ahead with what would amount to a second opportunities fund eliminated the rational for separate growth team with Bates and Mezvinsky.

“Doubling down on proven winners from our venture funds is best carried out by our venture partners,” Palihapitiya wrote.

The firm last year brought on Mezvinsky as vice chairman to manage its capital formation efforts and Bates as CEO of Social Capital Growth. Mezvinsky co-founded the hedge fund Eaglevale Partners, and Bates previously was president at GoPro and CEO of Skype.

Palihapitiya said he is looking at ways both might be board partners or advisers.

“For the foreseeable future, we will stick to what we are truly passionate about: high-touch venture investments and building out our platform that provides these entrepreneurs with tools and software to build better companies,” he wrote.

This includes data-driven tools and platform technologies, including tools such as CaaS to help find companies and the 8-ball analysis.