Social Capital's 8 Ball Failure

A story about how Chamath Palihapitiya tried to create an automated investment decision system at Social Capital.

"Chamath, who was the founder of Social Capital, came from Facebook where he was leading the growth team and helped grow it from 100 million to a billion users. He wanted to bring that same analytical rigor to venture investing.

The thought evolved into something he called 'capital as a service' instead of software as a service. Here's how it worked: It was self-serve - you come and plug in your analytics, their algorithm runs a formula that tells you two things:

First, how you rank relative to other SaaS companies your size, age, and demographic. You'd know if your retention was better or worse than other companies. Second, they had a 'moneyball formula' to determine if they should invest in you or not.

As a founder, it was scary because you had to give Chamath all your data, piped right into their database. Whether they invested in you or not, they downloaded all your historical data. So if they looked at The Hustle, they'd know whether to invest in The Hustle, but also Morning Brew and The Skrim and any other similar company - they could compare and contrast.

I think ultimately it was more marketing than substance. I don't see them using it anymore, though the group that spun off from Chamath - Tribe Capital - might still be doing something similar."