How Did Chamath Palihapitiya Make His Money?

Everyone knows the name Mark Zuckerberg. He is the brilliant mind behind Facebook (FB), the largest social media platform in the world. Today, Facebook has more than two billion monthly active users (MAUs) and it is worth nearly $750 billion.

However, back in 2007, it was just a small tech startup. A “mere” 58 million people used the site, and it operated at a loss. 

Zuckerberg might have launched the network, but its astronomical success was a group effort. One of those who took the company from startup to profitable enterprise was computer engineer Chamath Palihapitiya.

During his tenure, Palihapitiya was part of the leadership team that pushed Facebook to profitability. When he left in 2011, the platform was well on its way to becoming the tech giant it is now. 

Palihapitiya has since moved on a variety of independent projects that mirror his passions. His estimated net worth is more than $1 billion, which has many asking how did Chamath Palihapitiya make his money?

How Did Chamath Palihapitiya Make His Money?

Chamath Palihapitiya’s story sounds like the plot of a fairy tale, though it is very much true. He was born in Sri Lanka and fled with his family to Canada at the age of 6. Palihapitiya’s childhood was marked by deep, unrelenting poverty. 

His father was unemployed most of the time, and his mother held low-paying jobs in housekeeping. For a period, the family relied on government assistance, and Palihapitiya worked at a Burger King to make ends meet. However, he was able to earn a degree in electrical engineering, and from there everything changed. 

Palihapitiya worked at AOL first, eventually becoming the group leader for the then-popular AIM chat tool. He rapidly proved his skill and ability to drive innovation, and soon, he became the youngest Vice President in AOL’s history. 

Palihapitiya was hired away by the Mayfield Group Venture Capital Fund, and just a few years later, he found himself working in a senior-level role at Facebook. While at Facebook (FB), Palihapitiya earned a substantial salary, and he was rewarded for his work with hefty bonuses. 

He invested that cash in a number of promising companies that delivered strong returns in a short period of time. Examples of the investments that helped him grow his fortune include Pure Storage, Bumptop (later purchased by Google), Playdom (later purchased by Disney), and Palantir (PLTR)

Why Is Chamath Palihapitiya Famous?

Chamath Palihapitiya was an important part of Facebook history, but that isn’t why he is famous. These days, many people don’t associate him with the social media platform’s success at all.

Palihapitiya made a name for himself in a number of unusual ways. One of the most remarkable is his skill at poker.

Among other poker-related achievements, Palihapitiya competed in the 42nd and 43rd Annual World Series of Poker, finishing 101st out of a total 6,865 participants. For a time, he hosted some of Silicon Valley’s biggest movers and shakers in the area’s most popular poker night. 

With that said, most agree that Palihapitiya’s fame comes primarily from his philosophical ideals, which he is not shy about sharing. Palihapitiya regularly speaks out on wealth inequality, social justice, and the lack of diversity in critical STEM fields. 

Perhaps the most unexpected position Palihapitiya has taken publicly is his stance against social media. He says he doesn’t use Facebook and keeps his family away from the platform. He discourages others from participating in social media, and in 2017, he said this about his participation in the growth of Facebook:

“I feel tremendous guilt. I think in the deep, deep recess of our minds, we all knew something bad could happen. It’s a point now that we have created a tool that’s ripping apart the fabric of how society works.”

These and related remarks have made him especially relevant in the national conversation about bringing people together and healing the deep divides facing the country. 

Why Did Chamath Palihapitiya Leave Facebook?

When Chamath Palihapitiya announced his departure from Facebook, many were stunned. He had been an integral part of the company’s success for four years, and he had been well-compensated for his efforts.

He might already have started to feel some concern about the negative impact of social media, but if so, he didn’t cite that as a reason for moving on. 

Instead, he was focused on using his wealth and influence to provide financial backing to startups that showed promise, but were not getting attention from traditional Venture Capital firms.

He was optimistic that he could “change the parts of society he disagreed with” through a new type of VC firm. He called it Social+Capital Partnership

What Does Chamath Palihapitiya Invest In?

Both through Social+Capital and on his own, Palihapitiya has invested in a wide variety of businesses.

Some are relatively mainstream, like Amazon (AMZN) and Tesla (TSLA).

Others seemed like longshots when Palihapitiya got on-board. That includes Hinge, Wealthfront, Virgin Galactic, and Slack.

But his ability to see the potential in those companies before anyone else is one of the many reasons he was able to generate strong returns in his own portfolio and in that of Social+Capital. 

Chamath Palihapitiya Portfolio Returns

Palihapitiya has the freedom to pursue investments that meet his standards for improving society as a whole, because he has moved Social+Capital from a Venture Capital model to a special purpose acquisition company (SPAC) model. In a single year, the firm generated $1.7 billion in profit. 

The current version of Social Capital continues to be very successful. Palihapitiya reported that his funds have compounded at a rate of 33 percent per year, and net returns tend to be near 30 percent.

Overall, Chamath Palihapitiya’s story has fascinated members of the investment world and non-investors alike, because he is one of the least traditional members of the so-called “1 percent”.

He overcame extraordinary challenges and grew a fortune through his skill and talent, then turned that fortune into a force for good. 

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