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Cracking Private Companies: Investors Buy Into Tribe Capital’s Vision of Disrupting Silicon Valley Itself

Founders Ted Maidenberg, Arjun Sethi, and Jonathan Hsu now have $1.5 billion to invest in companies based on insights from quantitative techniques and data science.

Investors, including a major public pension, as well as endowments, and sovereign wealth funds, have poured approximately $300 million into a Tribe Capital fund, more than double what Tribe had targeted, according to sources close to the firm. The fund close brings Tribe’s cash haul to $600 million for the year, according to one source, and the firm’s assets under management to about $1.5 billion. 

The fundraising is not surprising given the pedigree of the firm’s founders. Tribe Capital is the venture capital firm started by the former partners of Chamath Palihapitiya’s Social Capital. Ted Maidenberg, Arjun Sethi, and Jonathan Hsu, left Social Capital during the summer of 2018. Tribe raised a Special Purpose Acquisition Company in March. Its current fund contains tech companies such as Carta, a fintech outfit, and Kraken, a cryptocurrency exchange, Relativity Space, a 3D printing and rocket company, and Instabase, which builds enterprise AI tools.   

Still, Tribe’s successful fund raise is a high-profile validation of the venture firm’s thesis, one that could ultimately disrupt the way the VC industry operates, from identifying promising start-ups to determining whether to back mid- and late-stage companies. While Silicon Valley venture capital has bankrolled tech companies that have upended whole sectors of the economy, venture firms themselves still use little more than Excel spreadsheets to identify companies and conduct due diligence. 

According to sources who have heard his pitch, Sethi says it doesn’t make sense that with 50,000 companies globally, which are being funded in some way by venture, that investment firms don’t use sophisticated technology as part of the process. Two-thirds of Tribe’s staff is in R&D, engineering, and data science. Other firms rely on what Sethi has called “partners with a Midas touch” to make investment decisions.  

Few investors can imagine not scrutinizing hundreds of millions of data points in their analysis of public companies. But that’s not the case with private businesses, even though there's data available to do that work. It's just not as plentiful as at public companies. Tribe, which meets with 1,000 companies a year, runs detailed reports on the businesses of 500 and then invests in 5 or 6 firms, according to sources. 

Tribe’s founders are hoping to provide a level of transparency to institutions that rarely get to see beyond venture capital firm’s “black box.” 

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