In 2010, Chamath Palihpitiya helped buy the Golden State Warriors for a record $450 million. Today, the NBA juggernaut is worth $5.2 billion, according to Sportico. But Palihpitiya’s investment almost didn’t happen — in fact, the Warriors weren’t even his first choice.
In a recent Twitter thread, Palihpitiya, founder and CEO of venture capital firm Social Capital, told the story of how his $25 million investment came to be. While getting Social Capital off the ground, Palihpitiya was looking for a hedge. According to him, sports was the “the most uncorrelated asset possible.” Palihpitiya called up a hedge fund manager and made a plan to buy an NBA team.
Palihapitiya and unnamed but "well known" hedge fund manager decided to pair up to try to buy a professional basketball team. The two retained boutique investment bankers Allen & Co., set up a meeting with David Stern, the then-commissioner of the NBA, to discuss a purchase of the Sacramento Kings.
“The meeting rolls around and Stern sits and listens patiently about our ideas and desire to buy the Kings,” Palihpitiya wrote. “At the end of our monologue, he asks one simple question: ‘How much do you think the team is worth?’ We answer and float an admittedly low number (less than $300M). He looks around, slams his fists on the table and says: ‘Then you're in the wrong fucking meeting!’”
Palihpitiya was dejected. At the time, he had put in $60 million in Social Capital in a bid to get Peter Thiel on board as an LP. His first fund totalled $275 million, and the lack of diversification in his assets left Palihpitiya “100% anxiety ridden.”
Instead of admitting defeat, Palihpitiya met up with a friend of his, professional poker player Phil Hellmuth. Hellmuth introduced Palihpitiya to Joe Lacob, a partner at Kleiner Perkins capital. Lacob mentioned that he was in talks to buy the Warriors, and offered Palihpitiya 10% of the team, worth $25 million at the time. Oracle co-founder Larry Ellison was rumored to be buying the team, so the deal appeared unlikely to Palihpitiya. And yet it happened.
“I shook his hand, wired the money and at 34, became a co-owner of an NBA team,” he wrote. “Pretty nuts! Joe's obviously done an amazing job building the best franchise in sports and I've been extraordinarily lucky to be along for the ride. It's given me so much joy and happiness.”
Today, Lacob is the majority owner of the Warriors along with Peter Guber, who serves as co-executive chairman of the team. The purchase came during a pivotal time for the Warriors, who hadn’t advanced to the NBA finals in four decades. Then, with a new coach, Steve Kerr, and a young superstar named Steph Curry, the Warriors became legends, winning three NBA titles in four seasons. The only team currently worth more are the Knicks, who are valued at $5.4 billion.
As for Palihpitiya, his $25 million investment for a 10% stake is now worth $520 million according to the latest valuation, a 2000% return.
Palihpitiya concluded: “And it all started because Peter Thiel pushed me to invest more in myself, David Stern deflated my dreams of diversification and Phil Hellmuth was just a good friend who wanted to cheer me up. Crazy how life works sometimes.”