NEWS

Social Capital Terminates Two Partners Over AI Startup Investment Dispute

Social Capital, the venture firm led by Chamath Palihapitiya, has fired two of its partners, according to a letter sent to limited partners.

Chamath Palihapitiya, founder and CEO of Social Capital.

Jay Zaveri and Ravi Tanuku were terminated on Sunday in an apparent dispute over the firm’s investment in an AI startup known as Groq. In the letter, Palihapitiya said the firm “became aware of a situation” last week and launched an internal probe on the matter. On Thursday, the firm hired Wachtell, Lipton, Rosen & Katz to escalate the investigation.

Social Capital backed Groq, a startup developing custom low-latency chips for AI models, via investments in $52 million and $60 million convertible notes across 2017 and 2018. The company’s most recent valuation of $1.1 billion was set in a 2021 Series C led by Tiger Global and D1 Capital.

Axios reports Groq is currently in discussions over a new round of fundraising, expected to be a meaningful valuation step-up from its Series C.

Early speculation on the cause of the Social Capital partnership disagreement has centered on a recent special purpose vehicle marketed by Zaveri and Tanuku, which offered to sell investors an allocation in the firm’s Groq stake.

In a statement provided to Bloomberg, Tanuku’s lawyer said “A number of employees invested in and worked on the SPV. Mr. Tanuku firmly believes that he has acted with the utmost integrity during his tenure at Social Capital and throughout his career, as will be substantiated when the full facts come to light.”

Social Capital yesterday posted on Twitter “We have terminated the employment of two of our employees due to employee-specific circumstances. We have no further comments at this time.”

The firm said it will begin work to transition portfolio company board seats held by the former partners.

 

Chamath

Social Capital continues to manage some outside money, though is now primarily run as a family office for Palihapitiya. The firm had attempted to raise new capital from limited partners in 2022 but announced earlier this year it had halted those efforts.

A former Facebook executive, Palihapitiya notched a series of early venture wins with investments in companies including Yammer and Slack. He later achieved a level of fame and notoriety, particularly with retail investors, through his work as the self-proclaimed “Spac King,” launching a series of blank check entities that saw mixed performance in deals to take public companies including Virgin Galactic, Opendoor, and Sofi, among others.

In recent years, Palihapitiya has maintained an active online presence, co-hosting the technology-focused All-In Podcast and delivering a steady stream of reaction-inducing commentary.

On the lighter side – self-comparisons to Warren Buffett, posts of his own shirtless pictures, and an often-ridiculed quip on his exploits as a venture capitalist: “I'm in the arena trying stuff. Some will work, some won't. But always learning.”

Less well-received were public statements made in 2022 on Uyghur human rights: “Nobody cares what’s happening with the Uyghurs. Every time I say that I care about the Uyghurs, I’m really just lying.”

Sam Hillier

Sam Hillier is a reporter at Transacted covering private equity and investment banking. He previously spent time as an investment professional focused on direct buyouts, as well as an earlier strategic advisory stint.

Join Transacted for Free

Unlimited access to the latest private equity news, trends, and insights.

 
  • Always free
  • Exclusive stories written specifically for investors
  • The weekly briefing with news, deals, and fundraising activity
  • Firm profiles & transaction data for buyout and growth investors