SAN FRANCISCO | Palihapitiya's family immigrated to Ottawa from Sri Lanka when he was six, and he went on to study engineering at the University of Waterloo. After a brief stint as a derivatives trader on Bay Street, he moved to Silicon Valley, where he became one of Facebook's first employees. He used the money he made there—his fortune is reportedly around $1 billion (U.S.)—to start Social Capital, whose data-driven mission is nothing short of saving the world. It invests in startups tackling health care, education, climate change and the future of cities.
How is Social Capital changing the traditional venture capital model?
We're witnessing the great unwinding of venture capital as it has historically been practised. We believe our future—and the future of investing in any asset class—is pairing humans with sophisticated machine learning, software and tools to make ever more precise and valuable investment decisions. We're now incorporating all these tools into what we call the Social Capital Platform. The first of these tools we've exposed publicly is our automated diligence tool, Capital-as-a-Service (CaaS), which democratizes and scales access to capital globally by allowing any company to get baselined with respect to the quality of their business and get capital in as short as just a few days.
What metrics are you most interested in?
Every metric we can collect. Relying on GAAP or other lagging measures of value is not a durable way to make decisions. By collecting massive amounts of data and pairing that with a learning mindset focused on experimentation, we can find the true North Star metrics that will define the success and failure of a company. More generally, if we have too strong a view on which metrics matter, we're introducing bias from the start, which is precisely what we want to avoid.
When you're evaluating a startup to invest in, what do you look for?
Our mission is to advance humanity by solving the world's hardest problems. This isn't altruism—we believe these companies can become enduring and wildly profitable businesses, but they're consistently overlooked by most investors. Mission-driven founders and companies also have an edge when it comes to hiring top talent—they're magnets for people who are passionate about the problem they're solving.
Right now, Silicon Valley is overwhelmingly white and male. How do you go about funding a more diverse slate of entrepreneurs?
There are two fairly simple ways to improve diversity. The first is to chip away at the overwhelmingly white and overwhelmingly male investor class. They tend to make fairly homogeneous investment decisions, and you perpetuate patterns when it comes to which founders and companies get funded. We've partnered with The Information [a tech news site] to track diversity for the past few years, and it's improving, albeit slowly. The second, hopefully faster, approach is to try to strip bias out of investment decision making. When we ran our pilot for CaaS, we looked at company data before we even emailed with a founder. After six months, we looked back at the dozens of companies we'd committed to funding and found that more than 40% had female CEOs, and the majority were non-white. That's a pretty powerful indictment of the conscious and unconscious bias in investing today. /Interview by Dawn Calleja