Silicon Valley investors have turned more supportive of 25-year-old hedge fund manager Leopold after his fund, Situational Awareness, suffered a blowup, according to BlockBeats on Aug. 8.
People familiar with the matter said a large number of investors in Silicon Valley contacted the fund within just a few days to express interest in committing more capital.
VC backers publicly lined up behind Leopold
Sequoia Capital partner Pat Grady said Leopold would remain an important figure in Silicon Valley over the long run. Veteran venture capitalist Elad Gil said he had applied to invest in the fund for the first time.
Redpoint Ventures managing director Logan Bartlett put it bluntly: “There’s a hero archetype here — Leopold got punched in the face, and it actually rallied people around him.”
The fund is still up about 80% this year
Despite the damage, Situational Awareness has still posted about an 80% gain this year, with the remaining portfolio valued at roughly $10 billion. Even so, the fund has told investors it is not taking new money at this stage.
In a letter to investors, Leopold said he had eliminated all leverage. He described the crisis as an expensive but invaluable lesson and said he would, at least for now, stop using bank prime brokerage services to amplify positions.
Wall Street and Silicon Valley saw the episode very differently
The incident exposed a deeper split between Silicon Valley and Wall Street. On Wall Street, the episode was viewed as a classic case of excessive leverage. The founder of S3 Partners said, “This was a super concentrated, super crowded, and also super highly leveraged position.”
Barclays had previously declined to take the fund on as a client, citing overly concentrated industry exposure.
Silicon Valley, by contrast, saw the selloff as a buying opportunity. A New York University professor said Silicon Valley rewards people who are right about transformational technologies, while Wall Street rewards those who preserve principal and generate risk-adjusted returns.