Social Capital Hedosophia is Going to Change the VC Game, But Will It Really?

Several weeks ago, Chamath Palihapitiya did an interview with Kara Swisher on Recode/Decode that really got my attention. He was talking about how the venture capital industry was overdue for a shakeup to meet the needs of technology startups. He talked about using data science to identify investment opportunities and scale companies, similar to what he did while he was at Facebook to provide in depth services to these startups.

Further, rather than there being a ton of pressure for these companies to go scale quickly, they would have an investor that would be with them for the long term from the beginning. This sounded really interesting, particularly when he posited that this new iteration of Social Capital was going to surface founders who would typically be overlooked because of the way in which they will be looking at data.

One question that comes to mind is how would they overlooked founders get on his radar. What’s his plan to get data across a wide enough geography in order to capture these overlooked startups?

Admittedly, during Chamath’s conversation with Kara, I was unsure of what this new iteration of Social Capital would look like. Well, I got my answer a few weeks ago when Social Capital partnered up with Hedosophia to list on the New York Stock Exchange, forming Social Capital Hedosophia.

What is Social Capital Hedosophia? This is a publicly traded holding company that is designed to take unicorns public without them having to go through the traditional process of going public – roadshows, lockup period, etc.

Initially, I thought that this new model Chamath was talking about could be a game changer for startups run by black people. Perhaps, this new iteration of Social Capital could do like Chamath said and reduce the exclusion of underrepresented groups from taking the next step in building technology companies. But, I’m not sure that Hedosophia has the people it takes to address the pipeline issue.

Beyond using data science, Chamath cannot cut out the human component of how he builds out this new company. He’s got to build a team that has a global worldview that can see into the worldview of folks in Jamaica Queens, Kansas, Lagos, and Bogota. Layer the machine learning on top of that and you’re cooking with grease.

If Social Capital Hedosophia (I’m going to get carpal tunnel if they don’t come up with shorthand for this.) doesn’t do this important work, the company will just do what the rest of Silicon Valley has done, just more elegantly. Removing bias doesn’t matter if you’re pulling from the same pool of folks.

How Does Africa’s Innovation Economy Tap Into Africa’s Wealth?

Yesterday, I had lunch with a friend who is raising a fund for her Lagos-based startup. At one point in our conversation, she shared the effort she has had to go through to get people she has met with in Silicon Valley up to speed on what is happening in Nigeria’s tech space.

This has been a refrain from a number of entrepreneurs and investors who are already tuned in on what is happening in Africa’s innovation economy. Fortunately, the tide seems to be trending towards Silicon Valley getting more hip to what is happening in Nigeria, Kenya, and to a lesser extent South Africa (Cape Town-based Naspers has led some massive investments that I am sure Silicon Valley investors have noticed.)

While we chatted, my mind went to some research I saw this weekend on Africa’s high net worth individuals. Capgemini’s annual World Wealth Report pegs the wealth of the 150,000 high net worth individuals across Africa at $1.4 trillion for 2016. These are people who have at least $1 million in investable assets, excluding primary residence, collectibles, non-durable goods like sweet potato pie, and durable goods like automobiles.

This is serious capital. I wonder what percentage of this wealth has gone into Africa’s innovation economy since 2009. The Capgemini report highlights three industries that are going to drive wealth accumulation globally through 2025 – financial services, technology, and healthcare. There are startups across Africa doing interesting things in all three of these areas, yet the challenges of getting Africa’s wealthy to invest in the continent’s startups has been a conversation for several years now. I think we’re trending to those conversations being fewer and fewer.

There are several people working to build a critical mass of wealthy investors across Africa committed to investing in Africa’s innovation economy, and these initiatives are gaining real traction. Further, some African governments have developed initiatives to support innovation economies within their borders. Two years ago, I watched Something Ventured, and it really got me thinking about how African governments could level up their involvement in Africa’s innovation economy. I’ll share where I’m at on that at some point.

In the meantime, what is your assessment of Africa’s wealthy investing in Africa’s innovation economy?

Soul City: A City for Black Folk

My head is still shaking after learning that a prison sits on the land where Floyd McKissick was trying to build a city for black people.

White Flight, Urban Crisis, New Cities

Soul City was a project McKissick began working on in the late 1960s as part of an initiative at the Department of Housing and Urban Development to deal with the urban crisis in America. White Flight was taking place and the health of urban cities was not good – crime, bad housing, few job opportunities.

The initiative was to fund the development of 13 new cities to test whether the creation of new places to live was a viable option for dealing with the urban crisis. McKissick applied for the initiative to develop his idea for Soul City.

Floyd McKissick

Floyd McKissick was a leader in the Civil Rights Movement. His contemporaries included Stokely Carmichael, Martin Luther King, Jr. and Whitney Young. As the Civil Rights Movement gained steam McKissick and Carmichael pushed forward the Black Power Movement saying that the Civil Rights Movement wasn’t going far enough and things weren’t moving quickly enough for black people in the country.

The whole time I’m listening to the introduction of this podcast, I’m wondering why I don’t recall ever hearing about McKissick and well I know that there’s so much that I don’t know about the movement someone at his level I think I should have run across his name and not exactly sure why that is. The podcast puts forward a theory I’m not sure I agree with, but I hadn’t heard of Bayard Rustin for a long time either and he had kind of been written out of history for a while too.

Soul City, Silicon Valley, and Wealth

I was shocked to learn that Soul City had an incubator called Soul Tech One, which was focused on nurturing new companies. I couldn’t help but think about the early days of Silicon Valley, which had begun its evolution just 20 years prior. In the 75 years of so since the beginning of Silicon Valley, the billions of dollars of individual wealth that has been created is mind boggling.

Today, the conversation around the lack of presence of black people in the technology sector is at its peak. To think that someone was trying to set up the infrastructure that could have taken a shot at being significant in generating wealth through technology in the black community is inspiring. We can finish this. We have the creativity. We shape culture. We have the stamina to make it happen.

For some time now I’ve been having conversations with friends about getting black people in this country to a place where we’re operating from a position of power economically. My talking about this isn’t really what will get it done at this point. Someone I care about a lot really impacted how I look at wealth and positioning myself to build it for myself while working on seeing a bunch of rich black people in the US and Africa who can and do write checks for nascent businesses and who shape policy.

This shift in my thinking is a large reason why I haven’t been writing for the past few months. I’ve really been working hard and have made good progress, and have a couple more years to go. The past week though has been difficult and I have felt concerned about my ability to continue executing the plan. This podcast pissed me off and inspired me. Good oxygen for my fire to keep me going.

Soul City and a Prison

We eventually learn that the Soul City project failed after it lost oxygen due in part to an audit that Senator Jesse Helms ordered for the project. To this day I still feel bad for confusing Jesse Helms and Howard Coble as a kid. The two couldn’t have been more different legislators.

All these years later a prison sits on the land that was Soul City. There are countless studies on the all too familiar relationship the black community has with prisons in this country. The irony was overwhelming to hear that one of those structures sits on land that could have been home to a thriving black community – a project that could have potentially seeded more like it.

Let’s Go on a Road Trip

I’m curious to see what remains of Soul City plan to drive down there in the next couple months. Feel free to email me if you’d like to come along – kwamesompimpong@gmail.com.

Eric Osiakwan Pushing the Growth of Africa’s VC Space

I thoroughly enjoyed interviewing Eric Osiakwan about his experience building internet infrastructure in its early days in African countries, and the transition to investing in African startups. On top of that, he is pushing to get more Africans in the investing game to support the growth of the technology industry across the continent. Here’s the transcript of our conversation.